I am glad that things turned out just like I planned, and I made a nice profit on it. I bought back only 50% of what I had sold earlier when the market retreat to its 20-day moving average. I was hoping the market could retreat further to its 30-day moving average, then I would buy back the rest 50%. As we all know, things will never go exactly as how you plan it to be.
Most of the time, if the market is very bullish, 20-day moving average could become a pretty good support, and the market will rebound once it hits that line. From this point, I believe the market still holds a very strong momentum, which may drive the last leg of 5 Elliot waves to go a little bit further.
The Real Impact of QE3 to Stock Market
I sort of feel that the market has already factored in the fact that Federal Reserve would announce the QE3 this month. September is the best time for FED to announce QE3. It's right before the presidential election, and it could somewhat help to boost the economy a bit, thus it gives Obama more chances to get elected. Now, the question is that can this QE3 push the stock market up a lot higher from today's price level? My hunch to this question is probably not much. From the chart, it looks like we are at the wave 5 of the uptrend. It still now showing any signal that we are topped, but we are certainly not far from there. Investor sentiment is currently at the red zone and should catch enough of our attention. Usually, the last leg will go as much as the first leg goes. From QQQ's chart, I can see the first wave started in Oct 2011 went up about $10. So, our current leg started at $62 from Jul 25, and it could end up with somewhere around $72.
How Soon Will We see the Top?
This is a very hard to answer, and it really depends on what signals does the market show to us. Next Fri is our September option expiration date, during which the market could usually be volatile. It's very easy for the market to go up another 2 bucks and reach the $72 destination level. I would sell all my positions when the market gets there. In fact, I have already setup my limit order with my online broker.
If we look back to 2004, which is also a president election year. The market went wild until the end of the year. Is it possible that the same thing happens again this year? Well, it's very likely that we see the market stay very bullish until then, but right after that, there must be a sizable correction downward. Anyhow, I will be happy to cash out my not-so-bad profit for short term trading and see where the market is heading after.
If you are not in yet, DO NOT buy in next week. It could be very risky!!
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