Just as yesterday, we remain in between fibs. I still expect lower prices to come.
We have a good fib at the 2.618 extension below (at 4104), and that’s my first expectation, but if we don’t get a good reversal there, then the 3.618 (at 4032) is also possible. Once we get a good reversal at a good fib, I will be inclined to understand that Green 3 is in, and will be looking for Green 4 to develop. Once that completes, I will then be looking for Green 5. I think it will be expected by most to make a marginal new low, but I believe that marginal new low (coming after Green 4 finishes) will only by one of Green 5, as it can extend just as the 5th wave going to the top of the market extended on the left of the chart.
The unexpectedly large Green 5 is the “surprise” feature I would like to see since most of us did expect a decline from the 200-day SMA, and somewhere in here there should be a surprise move to piss people off. And that’s the best spot that I can see.
As for trading this, in the morning strength, I ditched the call side of the strangle I opened yesterday (which I opened before I had a chance to develop this count fully, and wanted an agnostic position on while I did that work). I have kept the put leg, and still have puts of duration. And I sold a few short-duration bear call spreads near the little orange “a” for some lunch money.
If we do move down and tag a fib I will close the bear spreads, close the puts that came from Monday’s strangle and take on a few calls looking for the blue a-wave (of Green 4).
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