$SPX Update: The Binary Event Is Upon Us

Ok, the kitty funeral is behind us, sorry for the late post.

We have a binary event at hand, and I can’t predict with certainty what will happen. So, we’ll simply review options.

If we get a bad reaction to the CPI print, then this can have been a “B-Wave” in a large 3-wave decline, and we can drop to close to 3600:

A less bearish alternative is that we get a bad reaction, but not so bad, in which case we’re in an expanded flat for blue 2 in a big bullish move to the upside, like this:

If we drop but don’t take out the lows at the orange and green twos, and then begin to rally powerfully, then this becomes more probable.

And finally, if we simply gap up, we’re close enough to the 200-day that gapping right over it is also possible, as that is how we tend to recapture it, when we’re going to keep it. If we do gap up, then I would have to suppose blue 2 is already in and we’re in a 3rd of a 3rd up:

This isn’t as great, as it’s better to see a more obvious 3-wave decline for a 2, and the blue 2 in this count doesn’t look too much like an obvious 3-wave decline, as the orange a-b-c of blue 2 seems very cramped in there.

So, no way to know for sure what the inflation data is going to do to us, but I hope I am well enough positioned for the various possibilities. I remain long SPY calls of duration, and I also have a strangle. If we drop suddenly, I will likely drop the long calls and the puts should recover things pretty quickly. And if we simply keep going up, so much the better. So let’s see!