$SPX: Still No Changes

I see no reason to update my thinking from last week. With FOMC still ahead of us, we may do any of a number of things.

  1. It’s possible that “C” of “2” is complete, as we hit the 50% retracement on Friday, and if so, we may fall some more from here, and then rally into the FOMC announcement before falling again. (That’s the Green A-B-C count).
  2. But, we may also still go higher, and perhaps somewhat significantly higher. We may be in the Red “C” of “2” which can go to the 61.8% retracement, or even higher, perhaps even back to the 200-day SMA (orange moving average):

SPX

If I had to guess, I think we may rally some more, maybe to the 61.8% retracement or even to the 200-day SMA.

In any case, I do not believe a market low is in, and I believe we will eventually take out the October low.

As noted in the Discord, I have sold closer expiration and much higher strike puts against my longer duration puts, creating a sort of wide calendar bull put spread. If we stay here for a while, these short puts will protect my long puts, and if we rally more, same thing. And if we finally roll over, I will buy the short leg back. The only way these will hurt is if we fall very sharply very quickly, but I think things may take some time to roll over properly. I continue to be inclined to be patient with this structure.

And, as always, if I see something I particularly like, I will try to participate in the futures market as well, and I will discuss that more often in the chat.


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$SPX Analysis: No Changes

I see no reason to change the view I laid out yesterday (here).

If we are doing the Green A-B-C for Orange 2, we may still go a little higher to find good wave balance or, since we’ve come almost exactly to the 50% retracement of the decline since the August high, we may be good as is:

SPX

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Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.


A Couple More Comments on the S&P 500

The drop on futures took it to an interesting trend line that I have shown before, and I want to show it again. It’s a midline trend line of the entire bear market decline (the orange one):

ES

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Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.


$SPX Update

With important earnings still ahead of us and the FOMC still ahead of us, there are still a variety of things that may happen here.

In all of the cases, given the sharpness of the rally, and my assessment of sentiment and other instruments I look at, I am leaning to the view that this is a “2,” and that once it’s complete, it will fail and we should head to new lows—and perhaps dramatically so.

The options available to us are:

  1. We’ve topped now and we can fail, that’s one possibility. We have come to the 50-day SMA (the light blue moving average below), and that’s a place the rally can stop.
  2. We can consolidate up here still in the orange box until FOMC if they intend to take time to distribute.
  3. We can rally a little higher to 3918 where there is wave balance between the Green A and Green C (one way to count the advance). That is a 1:1 relationship there.
  4. We can also go even higher to the 61.8% retracement of the whole decline from the August high up there at 4006. There is wave balance up there as well if we use the Red A-B-C count, which is another way to count it (in that case, Red C = 1.618 x Red A right at the 61.8% retrace at 4006).

SPX

So, in sum: I think we’re most likely in a 2. It can have stopped, or it can go a little longer, and I have no great way given the big earnings and the FOMC to favor one alternative over another. I will hold my SPY puts of duration, and, as discussed in the Discord earlier, I have taken some Apple calls as a hedge (and I will take a few SPY calls as well because the IV on Apple is pumped to the gills right now). If we go up again, I will use the proceeds from those to roll my SPY puts out a little more in time.

But, I lean to the view that the rally will fail, and it’s now just a matter of finding where and when that will happen, and these are the possibilities I see at present. My goal is to remain patient, and to try to stay positioned for some of these alternatives as best I can.


Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.


$SPX Midday Update

My bullish case is maybe not looking so good. What I had wanted to see for that was a somewhat time-consuming accumulation far closer to the lows, perhaps like this:

SPX

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Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.


My Thinking on $SPX Here

Echoing the thought from yesterday (here), it remains possible that we see a reversal, but I am a bit more inclined to accept the possibility that we persist in a range up here for a while. We may be defining the limits of a range now, and we may stay up here in the orange box area for a few days. I remain inclined to the view that the rally is topping out, and that the downtrend will eventually resume. So, not much I can say for the moment. I think I may open some SPY bear call spreads above us, and see how things go. But, it might get boring for a minute.

SPX


Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.


A Few Updates for $SPX

I am particularly interested for the time being in the thought from yesterday (here). I am basing this in part on the plausibility of the count (which seems high to me right now), and on my assessment of sentiment and other instruments that I watch. Being this bullish in the short term is a warning, to my mind, a thought I discussed here. For us to have a much longer rally, I would rather have seen far more fear and worry, and some kind of better accumulation. Right now I am seeing perhaps the exact opposite.

None of this is to say this is the right interpretation, but it’s the one I favor the most right now. If we are coming to the end of a wave 4 here, we may see something choppy for the beginning of Green 5. In other words, Blue 1 of Green 5 might be something like a leading diagonal, something choppy and time consuming to get us closer to the FOMC announcement. If so, it could look like this:

SPX

The only other thing I can see that could prompt a more rapid reversal would be a news event (or an earnings miss), so we can’t rule out a sharp reversal. But, if we don’t get that, then I will expect something a bit more like this.

I have to leave for a couple of hours to collect my wife from the airport, and so I wanted to get this thought out before I left.

All of that said, we’ve had a strong reaction to the 200-week SMA, and of course it’s possible that a far more major low is in. But, at least for now, I cannot easily interpret this structure as any kind of impulse wave here. And it’s not as weak as I had hoped to see for my much bigger Green A-B-C of Orange B that I had been open to before (here).

So, let’s see what happens. I will hold my puts with duration, and I will be trying to get a short in on the futures somewhere up here.


Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.


An $SPX Possibility

I have been looking at the decline from the August high as an impulse wave complete. However, since wave fours can be long and complex, it’s possible that we’ve still been in one this whole time. This helps here because the price action is a bit of a mess right now. And fours are often messy.

There is wave balance between the legs of Green 4 (the blue a-b-c), if I count it this way:

SPX

We have that Pre-COVID high below us, and there is some wave balance down there as well (where Green 5 would equal Green 1). Now, if this rally does fail here, that all makes a good target down there. And when we get there, that should either be Orange A of a large A-B-C of “Pink Y” (you can review that here) if we’re not doomed, or it’s intermediate (orange) 1 of a very bearish pattern. In either case, we should rally from there, and it would just be a matter of how high (orange box for a 2 if we have a crash coming, higher for an orange B if we don’t have a crash—but we will worry about that later).

A “long drawn out 4th wave” is an idea I last discussed here.


Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.


An $SPX Thought

I don’t have a preference here on how to count the local structure. I don’t see anything yet that strikes me as the very best way to do it.

But, there are a few things I can say. It seems clear to me that the WSJ article was a test. So, if the Fed wants lower asset prices in the fight against inflation (and if they also know they will eventually pause), they send out a pause thought to see what the market does, and +4%. Now, what do we do with that? IF they think that’s too bullish of a reaction (remember their purported regrets over the August rally, thus Jackson Hole), they will probably use that to tailor their message on FOMC day.

That may all be fine, but I’m not sure how that can help us in a trade just yet. In other words, we’re in a blackout window, so they can’t do anything yet anyways.

At any rate, I will at least say this. As things stand, this structure doesn’t strike me as particularly bullish:

SPX

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Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.


Let’s Look at the 10-Yr Yield

The bond market is breaking, and so let’s take a look.

Week in, week out, we want to ask, “It’s got to be over, right?” But it keeps going. And my last look at $TLT (here) has been a flop and so let’s look again now. That article was almost a month ago, and I had great fibs and a good count for a bottom. But no bottom formed.

Looking at yields, we see two things:

  1. The giant inverse H&S
  2. And a multi-decade trend line

Now, regarding those,

  1. The measured move of the inverse has long since been met (that was to about 3.24%)
  2. And that trend line breakout looks like it might be genuine

10YRYLD

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Note: When articles are first posted, 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, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.