The Long Weekend Review (S&P 500, Bitcoin, Oil, etc.)

I will walk through a variety of things tonight.

The S&P 500 Count

My preferred analysis remains what it was yesterday (here). I will review it again now, briefly.

I believe we may be entering Orange B of Pink Y of a “Double Three” correction. I would like to see Orange B go fairly high, even breaking the upper rail, to form a very good bull trap:

SPX

I have selected that specific level because it will give us Pink Y = Pink W, and it will give us Orange B = 1.272 x Orange A. So goods fibs. There are other relationships that may work, but we won’t have to worry about that right now. First we need to see if we can get up off the ground.

One difference between this chart and the last one you saw is the red channel. I complained before that, despite the decline from the August high “looking” like an impulse (a 5-wave structure with 3 distinct lows—the green 1,3, and 5—and two distinct highs—the green 2 and 4), I couldn’t get it to work as an impulse because no good fibs. There has to be either a relation between a 3 and 1 and a 5 and 1, or 5 has to have a relationship to 1 through 3, or 1 and 5 must be related to 3. And no combinations of those worked. But, if we count the Jackson Hole meltdown as the 5th wave (of a lower degree) heading into green 1, we get fibs all the way down. And it’s the common fibs we would expect where 3 = 1.618 x 1, and 5 = 1. I discovered this last night, so I moved the channel. So, all that does for us here is gives us the proper channel to watch (it is constructed from the tips 1 and 3, then a clone of it is dragged to the tip of 2).

So, anyways, I think we are going to grind that channel for a bit. And after that, I think we’re entering a sloppy A-B in Green (of the Orange B way up high). But within all of those waves, there will be many internal waves, too. Let’s zoom in.

In other words, I expect Green A to be composed of 3 waves (blue a-b-c), then Green B to also be composed of 3 waves (it’s own blue a-b-c), and turtles all the way down (each of those will in turn be composed of waves, etc.):

SPX

Presently, I believe we are in Blue b of Green A. The blue b should be 3 waves (orange a-b-c), and I think Orange a is a leading diagonal completed today:

SPX

We have retraced to the 50-61.8% area of the big rally we just had (the orange box), and we should find some buyers in here.

I am expecting a very choppy market over the next few weeks perhaps. The reason is this: the bears want a big crash, the bulls just got one of the biggest reversals we’ve seen in years. I don’t think the market can crash with so many expecting it to. And I also don’t think the bulls should celebrate yet, because no Fed pivot.

So my compromise is to plan on everyone getting fucked.

Psychology

The reason I think this works, is: we just had a lot of volatility:

SPX

And what periods like this often do is cause a lot of grief, and a lot of greed. People will either say, “If only I had…” if they missed some of these, or, if they’ve caught a lot of them, they will size up. And how the market often (not always) responds to that is by doing this:

SPX

And as time goes on, as folks keep anticipating the next “big move” (because we’ve had so many big moves lately), they keep sizing up “knowing” that just around the corner is the big pop (or drop). And many people will do this with weeklies and hold them (you’re welcome to use them—I do—but drop that shit in a hurry man lol). And the market crushes and crushes and crushes and chops. This can take some time. IF I’m right about this, there’s a lot of trading to be had in here, but don’t overstay your welcome on any given one (maybe). And if you hate range trading, time to catch up on some Netflix, lol.

But, that shit to our right could be all these 3 wave hell gardens we might see in my primary count. I can’t guarantee it, I’m just saying I think it’s got good chances of happening here.

My Positioning

As you guys already know, I went into yesterday with calls and puts because the hell if I knew what the CPI would bring. And, hell it ended up bringing both, so awesome. On the open, I rolled my then ITM puts out in time, and back OTM and averaged down (WAY down lol) my calls. Then we got the big rally. I walked the calls off and only kept some runners by the close, but then I added to those puts, averaging them down (also WAY down haha) and expected a pullback today. We got that. So, I discussed this earlier in the chat, so some of you already know, but I have taken a strangle at the perimeter of this rally. It was a good place to do it, because we’re in the middle of what I think will be the range (roughly). The strategy is: if we move up, I’ll drop some calls, add a few puts, then if we move down, I’ll do the reverse, drop some puts, pick up a few calls, rinse and repeat. And sometimes I’ll be wrong and we’ll go up, and then up again. But I’ll just repeat the relevant strategy twice in a row if need be.

I usually do pretty well with this. I will also scalp some fute’s, but I will mostly point some of those out in the Discord, because it’s impossible for me to write a post for each of those. But, I will try to develop this count, and we’ll see how things go.

What if I am completely wrong?

This rally absolutely looks like an impulse wave. If a major market low is in, and my count is wrong, or just off by one structure, like maybe Green B is already in, like this:

SPX

I don’t think the fibs work for this, but it’s possible. If the bulls are right (just kidding, there literally aren’t any bulls rn), we could enter a third wave up from here. Ok, hence the strangle. The put side will get hurt, but mostly only initially. And the leverage on the call side will quickly outpace the losing side. And I can start rolling the call side everyday, resetting the gamma sweep, and it’ll be great, and I don’t have to guess which way we go.

And if the bears are right, there’s an option for them, too. This rally is absolutely an impulse wave. But “c” waves can be impulse waves, and so we can have dark stuff like this:

SPX

I don’t think the fibs are great for this, either (counting down to the blue 1 as an impulse), but it’s possible. And we could have had an expanded flat for blue 2, with the impulsive rally we just had being the orange “c” of that “2.” So we could be entering a 3rd wave down of an extended 5th wave. Ok, hence the strangle.

I don’t think these last two outcomes are likely, but they are possible. I’m planning on the compression, but will survive these other outcomes, too.

Some other Assets

I want to look at a few other assets. None of them tell me anything decisive, but I think it’s good to review them.

First, let’s check in on Bitcoin. First, zoomed out a bit, so you can see these various structures and my preferred greater count:

BTC

We may be in a huge, time-consuming Primary (pink) “4.” If so, it looks incomplete to me. I would expect another rally of some kind.

Zoomed way in, it’s in a funny spot. It has failed to retake the 2018 high, but it also hasn’t given up the June low (the S&P has given up its). It’s fallen from this little bearish wedge (orange), but remains inside the bear flag (green). And, remarkably, it’s still broken out of its long-term down trend line (red).

BTC

It’s a weird quasi mixture of bullish and bearish things. The persistence above the red trend line and the June low is terrific for crypto bulls. But, these other bearish structures will need to be cleared. The solution? We can remain in a large bearish structure (the big green bear flag), have a big rally, while the S&P has a year-end rally to finish its big Orange “B” from the beginning of this article. So, I can support a rally with this, so long as it doesn’t puke on us.

Let’s look at oil. I am expecting it to be in the orange B (of pink B):

OIL

That should take some time, but it shouldn’t be crashy. And when equities crash, oil usually does to. If this is entering something complex (orange B), it makes perfect sense for equities to enter something complex, too (the slop fest I expect here). And after that, I do expect this to rally in Orange C (of Pink B), and hell, maybe everything rallies there. I know oil rallying sounds like inflation-scare stuff, and I know that’s one culprit for equities’ weakness, but oil crashing can also accompany terrible economic news (because of low expected future demand), so a rally in oil, while it might sound like inflation is getting even worse, might also accompany some good economic news (improving future expected demand) and maybe that would also accompany a big rally in equities.

Hell, I dunno, maybe we have a really good earnings season, beating all the shitting expectations and guidance given last quarter.

So I can support a rally with this, too.

Alright, let’s see what happens. I hope some of this has been helpful to you and I hope you have a nice weekend.


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