I do worry that this bull flag on $ES may fail. There’s also the possibility that a more significant top is in, which really was my expectation from the cubic gamma thing. I really do think those are finishing moves, rather than beginning moves. The problem I’ve had is that the selling so far has been muted. But that could change in an instant.
Let’s look at two things.
1. First, $NQ. Whereas on the S&P, where the selling has been fairly lackluster, and difficult to count impulsively, it’s actually a bit easier to do so on the Nasdaq 100. We can get a much clearer five waves down and a retracement that does, like the S&P, only look to be a 3-wave move. If we’re actually in a larger impulse wave to the downside, we may actually fall to the orange box below in a third wave. That would be fun.
Note the two orange horizontal lines on the chart. I marked those out ages ago: they are actually the fibs where we would expect to find the top of intermediate (orange) 3 that you see at the top of the chart (that could also be primary, but that doesn’t really matter at the moment). And I find it interesting that that’s where it did take a turn, right in that range. It’s not the best looking impulse wave. We’d like to see more extension in the third (red) wave, but, if it were obvious, we’d all be short here, so perhaps this is a good trick. And it doesn’t break any rules.
2. Likewise, on $SPY, if this flag fails, we have a couple of options. If we fail and it’s an a-b-c, we could head to the c=a level noted. But if this is actually also an impulse as the Naz may be, we could fall even lower in a third wave.
I know it looks like we’re bull-flagging today, but I really would have expected this rally to carry us well into my orange target box noted here, and without having done that, that’s what’s given us “equal legs” on the advance from the low on the 10th. And that’s not what we’d like to see.
Bulls still definitely have a good chance here, too. We are, after all, in a bull flag, but, tops often look like bull flags too. Also the DIX has been utterly relentless. That’s decidedly on the bulls’ side. Bears would like very much to see that number fall off tonight.
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