The S&P 500
I continue to lean to the view that we are in minute (blue) b of minor (green A) of intermediate (orange) B of primary (pink) Y. You can review that overall look here.
Minute blue b may be an expanded flat, which I suggested this morning due to this morning’s gap up. If that is the high of orange b, then we can generate targets for orange c and blue c, which I noted today as well, and will post here:
Zoomed in, there are a couple of things I can do.
The first is to count the early decline as subminuette (red) 1, and the retracement today as red 2, with the second decline being micro (purple) 1, followed by a purple 2:
This is not ideal, as it is better for the low of purple 1 to have taken out the low of red 1. It’s not a deal breaker, but it is best.
The alternative is something a little more complicated, but would basically amount to the same thing. It could all be one 1-2, like this:
This is a long and meandering 2, but we recently had one similar to it (last chart here).
Trading and Positioning
As you already know, while we were in that wedge on Friday (red arrow), I took a wide November strangle around the range of the “High CPI Is Awesome Rally”:
The thought was that we might consolidate for a while (you can review that thought here). As we have moved up, I have been eliminating the call side of the strangle, and today I added to the put side because I expect us to go lower next. If we do, then I will do the reverse. In addition to this position, on the open today, I took some shorter-dated puts, and just before the open, I managed to get a short on futures. On today’s initial drop, I immediately took half of all added puts off (both those I had added to the strangle and the newer, shorter-dated ones) and closed my futures short, expecting a retracement, which we got (if you want granular updates about these sorts of position changes, it’s probably best to join the chat for most of those).
I’ve added those puts back on, but I also took a hedge using Friday calls. Couple of reasons:
- The idea of the strangle is that “if I’m wrong” and we go shooting up, I should have a call side, but I’ve taken profits on 75% of the November calls, so I’m sort of naked on one side. And worse, if we do go shooting up, I may have too much put exposure now. So, by adding the shorter-dated calls, I can do that without having to keep the very expensive November calls, which went ITM today.
- The other reason is a fractal that I saw earlier today and pointed out in the Discord chat. We had a gap & consolidate followed by a gap & crap in July and it was very bullish. We have done something similar now. You can see a picture of that by clicking this. They looked more alike this morning than they do now, but as a precaution, I wanted to increased my long exposure.
Alright, we’ll see what happens. I think we’re in a complicated structure, so it can be difficult and we’ll take it a day at a time. I would like to see lower prices next, but will try to remain prepared for various possibilities. The Netflix pump may be calling the immediate bearishness into question. If we do not see immediate bearishness, then I will have to suppose that we are probably headed to the upper Bollinger Band here:
If we do that, I’m not sure yet sure how I would want to count it, but probably still as some kind of 3-wave advance off the low, perhaps something like this:
This is not great, as “blue b” seems much too short “in time.” But, this is why I will try to have exposure in both directions, because many things can happen.
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.