$SPX Scenario If Sellers Are All Extinct

We just arrived at a downward-sloping 200-day simple moving average and passed through it like it didn’t exist. Highly unusual, for a couple of reasons. One is simply that we didn’t get any reaction. The other is that, in order to overcome resistance like that, we normally can’t trust it without gapping over it (see how we overcame it coming out of the COVID crash, for instance).

Now, we have some important economic data coming out this morning, and it’s possible that when it does, we sell off and the intraday break over the 200-day will be false. We can gap right back under it, and that would be a good sign for the bears. But what if we don’t?

I would be amazed, but I would also be wondering where in the hell are the institutional sellers? After all, that’s their moving average, one of the classic institutional moving averages. If they’re not here, then they’re not here, and here is a plan in case that happens.

Now, breaking the moving average was one big hurdle, and this main down trend line is the other one, for the bulls. If we get above both, it opens the door to a move to all-time highs.

I would expect us to move to one of these fibs (green arrows), probably, consolidate in some way, ideally by retesting the trend line, and then, if it’s not a bull trap, and we rally from that consolidation, we can move back to the highs:


I would expect some kind of 3-wave gesture like this (some large, orange, A-B-C).

If we don’t get weakness soon, I will simply—once again—sell higher strike puts against my existing puts, and collect some premium, while I look for shorter-term plays to the upside. I will forget all of this if we see some monster sellers show up soon, but if they don’t then presumably they’re just not here, and who am I to try to fight that?

I would be amazed by this, especially since I don’t really see a good, time-consuming accumulation at the lows. It’s a terrible structure on which to launch ourselves to the highs, but, as the fatalists like to say, it is what it is.

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