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):
Striking that and bouncing a full 40 points from it doesn’t incline me to think the index is too terribly vulnerable yet. It could be, and that is why I have chosen to hold my SPY puts of duration. But, I also don’t want to have a green candle rammed right up my ass, so I am willing to give the bulls the benefit of the doubt for another push and I want to remain open to that.
I sort of have a feeling that we’re not going to get the big move lower until the Fed kicks the stool from under our feet. And so I am sort of wanting to be extremely patient and wait until the FOMC before seeing the big oof.
Another thing is the the move off our most recent high does not look like a good impulse wave down. It could be, I can make it work, but it’s not the best. And I also don’t have a terrific fib relationship at our recent high to really secure (for me) a count that says the high is in.
So, here’s my plan. First let’s zoom in:
We have a bunch of economic data coming out in the morning, and they can do whatever they want to do with that. But, if we do open low, but not very low, like, let’s say in the orange box above, and find support, I will be especially open to another rally. If we get a gap and go (gap down and go down), I will be inclined to think the top is more likely in. But if we don’t drop very much (or if we gap up), I am going to probably expect a move up there to 4006. If that looks good, I will add to my SPY call hedges and attempt to enter a long futures trade.
This is all just some precautionary thinking. I do think we’re destined to head lower, but if this is a big, bona-fide “2,” sometimes they really like to stick it to the bears first and they can still do that some more here. This may be a “2” of a somewhat large degree (intermediate, orange), and I don’t want to rush it.