A Few Things I Can Do Here

It remains possible to count this as a nest of ones and twos either with orange 2 in now, or perhaps still higher above us as well (it can become more complex if need be). [I have also recounted the five red waves down because I could not find any wave balance using the preliminary count from earlier].

If so, once this is done, we should see a massive plunge in a 3rd of a 3rd wave down.

SPX

That said, I’m not yet too happy with this. That can change, but one way we can try to detect a 3rd wave down is by breaking parallel rails, which I would have preferred we had done at the open. As it stands, we only came to parallel rails.

One other option we may use is perhaps this (this is very speculative). All we really need for a 5-wave impulse is three lows without an overlap. And so it’s possible that we’re in one big impulse completing, rather than just getting into it.

We have a good enough window between blue 1 and blue 4 (the orange box in the middle of the chart). And if we have 5 waves complete for Green 1 (or we can go a little lower today to get the blue 5 still), we may actually enter a larger retracement for Green 2, the typical retracement of which can push us above the parallel rails:

SPX

I like this because I worry that there aren’t any trapped bulls right now. I feel like most of us expected a drop and we got it. That may be a warning (haha PTSD). If we do something like this, everyone will see the “bull flag,” bears will lose their minds, and the poke above the rails could be the real trap, when it is actually the Green 2 leading to much more powerful drop. And few enough people will see this as a completed impulse wave, though it breaks no rules as I’ve labeled it.

So, here’s what I’m going to do (because this is possible): I will hold my remaining puts (I closed some today), and I will also continue to hold the calls I have taken at these lows.


In sum: I am attempting to count to the move off the 8/16 high as an impulse wave. We may be in a very large one with a huge drawdown coming right now (entering a third of a third), but if that is too expected by too many people, I will also acknowledge that we have enough structure already to consider one full impulse wave complete, but with a long and drawn out blue 2 and a short a swift blue 4. But there’s enough here if that’s what it wants to do. And if so, we can see a rally that may look a whole lot more bullish than it really is and I will attempt to remain positioned for both possibilities. I would have better confidence in the ultra-bear case had we broken these rails.

I also like this psychologically: just as bears regain their confidence here, it could be a trap, and then just up above, just as the bulls regain their confidence after this drop, that becomes a trap, too.


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