$SPX Update

I have expected that what unfolds in the coming days if not weeks will be complex, and what we’ve been in the last few days certainly hasn’t disappointed on that front.

Heading into today, I expected us to be in “Blue b” of “Green A,” like this:


That should have produced a move lower, and then higher (lower for Blue b, then higher for Blue c). But we’re just not getting it. And the Wall Street Journal kindly provided Wall Street with the excuse they wanted to squeeze off some puts on OPEX.

This doesn’t affect much, so far as I can see. As it turned out, we did hit an interesting fib relationship toward the close:


At that level, it could be the Blue b is already in and we just saw Blue c (of Green A), where blue c = 50% of Blue a. Some nice balance. This would put us one wave ahead of schedule, but the general ebb and flow should still send us lower soon (if this count is right, and it might not be—it’s probably going to be too complex to foreshadow perfectly).

If we do fall next, then we could be in Green B. As far as targets, it’s hard to say here, but it would be nice if Blue a (of Green B) took out last Friday’s low (red arrow), and Blue c took out the lowest low (orange arrow). That would sort of be ideal.

Alright, as far as playing this, it hasn’t really affected anything for me yet. Early in the session, I let myself get stopped out on my futures short for over an eighty point gain, and I let it rally. I’ve put that short back on now. And I discussed this in the chat, but toward the close, I did two things to my options positions. I closed outright the last of my call leg of my wide November strangle. That was to protect me from upside, which came in handy today. And I used some of that capital to add to the November put leg, and to the shorter-term puts that are out a little over a week, but which sit closer, in that gap under the Blue b.

Now, I grant, we may still go up. And now I don’t have any calls. But, I like this count, and if we’re at Green A now, I was going to drop the call leg there anyways, so we’ll have to see. If we start moving up really vigorously, I will try to protect the puts by going outright long on futures with some reasonable size, but we’ll have to wait until next week to see what happens.

At any rate, despite the complexity, I am still inclined to think we will go lower. And the best I can try to do in a complex structure like this is to try to play things as we go along, which I’ve done. Let’s see what next week brings us!

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