$SPX Morning Idea

We are creating a “poor high” (if you’re unsure about what this is, you may read more about it here). We need to see an actual good reversal—preferably with an “excess high,” and so even if we do sell off some today, maybe these highs will be revisited.

If we don’t fall with some real drama, here is a variation of my count that will allow for some contraction in price up here, followed by another squeeze. It is still part of a broader head and shoulders pattern that I expect to unfold but it gives us a little more time (and space).

This contraction for “blue b” will allow for a mild selloff creating a flat-topped triangle (the green structure we’re in now), followed by one more rally to the target box that will close that big gap to our left (the thick red arrow in September):


If we sell off much harder than this and take out a bunch of lows to our left with conviction, I will be more convinced that pink B is already in, but if we don’t, I will try to be prepared for this. I have some SPY puts now. If we get a mild selloff (say, mid 3950s), I will probably simply close those immediately and take some new ones with more time to accommodate this possibility better (I will add a couple weeks). And if we do get another rally, I will simply add to them up closer to 4100. And if I see anything that looks like a little 1-2 after the blue b, I will probably take a few calls just for some fun in case we pop (I will discuss this in the Discord if I do that).

Now, all that said, Bitcoin remains configured in a terrible setup:


And if it collapse in a 3rd of 3rd of its Green 1, everything might drop very sharply. But, Bitcoin has not been well-correlated with equities for the last couple of weeks, and so it’s possible for equities to remain relatively strong while crypto sinks in this first minor (green) wave. So, I’m pointing all this out as a precaution. We may still fall dramatically, but if we don’t sell off too much, it could be one final bear trap.

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