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.
- 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).
- 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):
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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