One More Variation to Bookmark

This is just for the geeks who want to keep track of the different possibilities available to us.

I will briefly discuss one final variation that may also happen. In this post, I discussed the difficulty of counting this pullback we’re now in as a “4”: namely, that since “2” was “simple,” “4” should be “complex,” such as a flat. And since this decline was looking (at the time) like an impulse wave down, such a flat could not begin like that. However, since this move may now end up having been a 3-swing move, we no longer have that problem and may put a big 3 back up at the 8/16 high, instead of the “B” of a flat.

Since this move down—were it to stop here—now looks like 3-waves down, it could be the first swing of a flat (Green A). And flats can get really weird and difficult. One variation of the flat is the “expanded” flat, which is a widowmaker for everyone involved. Most folks don’t expect them and get caught somewhere. An expanded flat makes a low (maybe today), then goes on to exceed the origin of the first drop (making a new, “false,” high [Green B]), but then collapses and exceeds the original drop [Green C].

I have drawn one such structure below:

SPX

It is possible that this drop was the “A-wave” of such a flat. And if so, we may get a powerful rally that takes out the 8/16 high, breaks out of the down trend we’re in, only to then collapse in 5 waves right back under today’s low, before promptly reversing again and breaking out for real. You can see all the traps that could be involved.

At any rate, it’s possible. And if it does happen, I should be able to detect it based on the Green B. I think I know what that would look like, as a 3-swing move, and if I see that, I’ll say so loud and clear.


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


Get Me Out At Any Price

That was the kind of runaway panic into the close we all love to see, lol. 2.1 million /ES contracts contracts traded, a full tenth of that in one 15-minute candle near the close.

Could I have squeezed more blood from my long duration shorts? Yes. But, after the next two charts, you should be able to see why I’m not prepared to be greedy here yet.


The Bearish View

The bearish view has us having put in a major top at the 8/16 high in an ongoing bear market. This has been my preferred scenario. It has us breaking down from a head and shoulders topping pattern, and this next move should take us to 3300 for the pink C (though I think 3000 will be the eventual target, but we’ll discuss that if we get in that direction). That said, head and shoulders patterns almost always retest their necklines, and whether we do so right away or after a short while, it would still be my expectation, which is why I decided to close my long-term shorts because they were in profit, and I’ve never regretted taking profit when I had it. I believe there is a good chance that we will have some kind of bounce, even if we’re ultimately doomed.

SPX


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Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


One Last Fib Update on $SPX

I just posted some fib work (here). I should have spent two more minutes on that, because I have a better justification now. (Remember: the pink 4 count is only a placeholder for the moment; I am primarily interested in the 5 green waves for now). If I use the low at the green arrow for green 1, the rest falls out very naturally. And it would explain why I am seeing such a sharp divergence on momentum indicators here: it’s what I would expect to see at the conclusion of a 5-wave move. So, just pointing out that fibs can justify a low here.

SPX


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


Some Fib Work and Positioning Changes

Just looking at some fibs here on the S&P. Regardless of whether I will ultimately adopt the longer-term bullish count (which is what’s depicted here with the pink 4 being put in), I remain interested in the 5-wave count in green, at the very least. That 5-wave decline may also just be a “1” (to the downside) in which case we could see a retracement for a bigger “2,” and if it doesn’t stop sooner, there is a fib just below that can stop it, too (at 4086). I don’t like the “1 already in, and the green 4 is a 2” count (depicted in the 3rd chart here) because there is strong divergence at this low, inclining me to think this move is ending soon.

SPX

There may be other ways to count this that can see a low form sooner, too.

But here’s what I am going to do. In the bearish case, we should still see a bounce. But I am actually becoming increasingly intrigued by the bullish count, too. Just because of that Wyckoff pattern. It looks good until it doesn’t, and right now it does look good. That doesn’t mean I’m frothing with bullishness. But it does mean that I accept the risks of a possible markup.

So, because the bearish count should involve a bounce, and because the bullish count will involve a whole lot more, here’s what I’m going to do (don’t necessarily take this as trading advice; it’s just what I’ve chosen to do): my longer-duration puts are at the best prices they’ve been, and I’m going to clear them all.

In the bearish case, I should be able to take them back at better prices anyways. But in the bullish case, I won’t get these prices for them ever again. So, I’m closing the long duration short and will see what develops on the chart. If the market is really bearish and we’re destined for 3000, I will have plenty of opportunities from here to there to play the short side. But, I’m going to take profits on these for now.


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


One More $SPX Variation

Since we broke below the 8/24 low, we must rule out the first count in the last post. There is a variation that can rescue that, and I will point it out. We may also simply have seen (finally), the long-anticipated and not quite easily seen Green 5, giving us a much clearer 5-wave decline off the 8/16 high (instead of a truncation):

SPX

I won’t rule this out just yet, though, admittedly, it might be sketch. What I do know is this: if this is a trap, they often do it with a brief H&S neckline break, so we will have to see.


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


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

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Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


$SPX Post-Market Update

I have no significant changes to the thought from earlier. In that post, I suspected that we may have been pulling back for some kind of “2,” and we seem to have done just that, as we then rallied with some strength, which we would expect to see in such a wave count. If this is correct, we may gap up tomorrow, consolidate (for the orange 3-4), then make another high to finish the 3rd blue wave (I may need to change the wave degree later). After that, I could expect some consolidation for the 4th blue wave, then another high.

Now, whether this is part of an eventually bearish structure (a counter trend bounce, a “right shoulder,” etc.) or part of an outright new bullish move, I do not as of yet know. I will attempt to make that determination later after some more structure unfolds.

SPX

The calls I reaccepted this morning are now ITM, and I will keep them, and the bull put spread I opened this morning is getting rekt, so that’s all good so far.


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


$SPX Update

Carrying forward the work begun here, this feels too deep for a four, and so it’s possible that it’s a 2, like this:

SPX

It is also possible, given the depth and the fact that the drop may be in seven swings, that where I have the orange “a” is also the blue “2,” as well. I’m not yet sure. I have retaken half of the calls I dumped this morning, and since those had doubled overnight, these are free, so I don’t mind if I’m wrong just yet. I will hold my longer-duration puts in case this turns out to be the elusive Green 4 at the high today and in case we do end up making new lows for Green 5 (I can’t easily justify that additional drop right now given the size of this rally, but it’s still possible).


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


Some Initial Thoughts on $SPX

My fears that the impulse wave it looked like we were forming off the 8/16 high might truncate its 5th and final wave may have been justified. Now whether that was the conclusion of a 4th wave for the bullish count, or something else entirely remains to be seen still and I will wait before speculating on that. The two warnings I heeded were that we just refused to go and tag that ideal fib below us, and then, to make matters worse, my bear call spreads were threatened yesterday. I had been expecting the market to at least roll over a little more, moving down and to the right (e.g., here) and my placement of spreads like those often works.

Those fears led me to roll my ITM shorter-duration puts (from an earlier strangle) to OTM and I closed those bear spreads with minimal dignity in the late dump yesterday and took some shorter-duration calls to round things out.

As for today, regardless of whether we’re in a longer-term impulse wave, or some kind of corrective “A” wave up (of some larger corrective move), it seems acceptable to try to count this move locally as an impulse. If so—tentatively—I would put us in this blue 3rd wave somewhere:

SPX

As for playing this, since it looks like I caught a 3rd wave of some degree, I have begun peeling back off the calls I took late yesterday and since big pops don’t tend to simply collapse, but can take some time to roll over (all the threes, fours and fives we would expect), I am trying for some lunch money again and have sold some bull put spreads down near that open gap. We should stay elevated long enough for those to decay in my favor.

From here, I will be watching the structure to see if I can begin to start labelling the 4th waves up here somehow.


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


Let’s Examine the Alternate with Greater Care

I want to preface this by saying, no, I don’t think this is the most probable course. But, I haven’t worked out what the bullish setup could look like in detail, and I need to do that work beforehand so that I’m not grasping and guessing if things actually do get bullish. And so I’m doing that work now, and I will share it. And this way, if I start talking like a lunatic while the lights go off in Germany, you’ll at least know where I am coming from because you will have seen the charts beforehand.

So far (so far—this can change quickly), the once hypothetical—now somewhat more probable—Wyckoff accumulation that I have been entertaining is still looking textbook:

ES

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Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.