An $SPX Update

Contrary to the potential gap discussed yesterday, the reaction to Jackson Hole has so far been harsh. We have come back to revisit the neckline of what may be a head and shoulders topping pattern. We also reacted harshly to the 250-day EMA.

There are two things I feel like I can do. It’s still possible to count the structure very bullishly, so long as it doesn’t break down (it might). This could all be a 1-2, with the initial reaction to Powell laying a trap. Some of his language was hawkish, but so did it seem from the last notes, and it sparked a huge rally. So, one day is not enough to make that determination. If we get a big rally into next week, we may be in this:

SPX

And I won’t yet rule this out because the hypothetical accumulation is still tied up in these levels, and we don’t know yet if they will become support, or turn into resistance:

ES

The bearish alternative is of course that we’ve had an impulse wave down, a retracement, and that the head and shoulders pattern will fail:

SPX

So, I can’t really say just yet which one is preferable based on this alone. I will keep my long duration puts and the shorter-duration calls that I took yesterday (as those were paid for by yesterday morning’s strength). Hopefully we will see something soon that will help me to more decisively select between these alternatives with more certainty.


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