The Bull Trap Scenario

If we break above the trend line and stay above it, I have already discussed what I will probably expect (here). But, that doesn’t mean we can’t poke above the trend line. We have to find tested support on it, for the break to be any good.

And so IF this is a bull trap, here’s one way that can unfold.

Obviously, big sellers can show up at any moment while we’re up in a place like this. But, if they’re going to distribute at all, we can enter a 4th minuette (orange) wave for a little while, then squeeze a little higher, and one fib for that (there are probably some others I can use) is 4129. That will give some balance between the internal legs of the rally from the October low, and it will close the September CPI gap, and also clear any liquidity above the high leading into that CPI gap down:

SPX

Obviously I don’t see a lot of reasons to get too bullish here, and I will only be forced to do so by price action alone. So, between this bull trap scenario, and the potential rally to all-time highs (here), I think the bull trap setup is the more likely of the two.

So, I will hold some puts for a bit. If huge sellers show up suddenly and without any distribution, so be it. But, I will give them a little time and space up and around here in case we’re setting something like this up.


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