Let’s Look at a Variety of Things

First, let’s review this. In this article, I discussed the similarities I saw between the temporary high made on July 22nd and what we were forming presently (red arrows). That last one turned out to a “1-2,” and we went squirting up like a SpaceX rocket. And so far at least, this continues to look similar, especially after today’s drop and pop:

ES

One small difference I can see initially is this. In the July scenario, the area that had been support was lost, but then quickly recaptured (the thin orange buffer):

ES

But in our present situation, our little “once support” buffer is still resistance (at least for now):

ES

They may fix that overnight, I don’t know. But we will need to watch that.

Now, if blue 2ย is in, we can most certainly begin to count a well-formed initial impulse wave off of our low:

SPX

Excellent fibs. What we want to see is orange 1 (way up at the top right of the chart) ideally take out the high of blue 1, then pull back for orange 2, maybe retesting 4000 as support. It is best to count from one degree moving to the next (minute/blueโ€”to minuette/orange) using higher highs. We don’t always get it, but it’s best. We will have to see if we get that.

The risk is that even if bullish, maybe blue 2 isn’t in yet. We won’t even know that it is until we make a new high, but the risk is that it’s not this:

SPX

But rather that the a-b-c I detected wave balance for this morning (here) was only “a” of a larger a-b-c like this:

SPX

This can’t be ruled out. And after all, the orange box is the expected target for a 2. We don’t always get it.

And of course we’re staring at a very rounded-top look, and until we get to new highs, it still remains possible that Green C is in at our high.

So, we’ll have to see what happens.

But, given how this still “looks” like a 1-2, it remains a strong possibility, enough so for me to sell puts against my long put position and take a small long call position just in case we do go shooting up. When I look at the futures chart, I say to myself, “Well, that looks like a 1-2.”

And if we do start rallying, I suspect that the things that have done well lately (/RTY, /YM and the banks) will underperform while tech outperforms.

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