DOW JONES BULLISH BUTTERFLY: ENTERING CD DOWNTREND LEG

Evolving pattern does not meet Gartly criteria of 0.618 AB leg. Batwing would have a shallow AB , usually 0.5 - 0.618, with 0.50 XB.
Therefore it's a Butterfly pattern.

Look back at Nov 2018 to see the Bearish Bat, which was imperfect in Fibo. Market tanked anyway, if it wants to sell, it will sell, regardless of the Fibo.

Now we find ourselves in the penultimiate move of a great Bull Market. The next to last move is a CD downtrend wave; it will be fierce and sell for a month.

The pattern has evolved near perfection with 0.786 XB and a rare 0.905 BC Fib retracement of XA. This is quite Bullish and suggests the rally to follow Butterfly structure completion will be vigorous.

A perfect butterfly would evolve with XD = 1.27; this model projects 1.618 Fibo retracement to 24,224 on 29 October. Just a WAG, but I'm betting on it.

After completion, the Bull wave to follow will likely reach 2.618 of AD, or 27,716 by EOY.

This isn't investment advice, just a model based on observation; models may fail; be prudent; trade at your own risk! GLTA!

Trade active:

Shorts did good, real good. Briefly toyed with calls around 10AM but then realized FFS it's a correction; Fly, you Fool! Look for a 0.50 Fibo bounce on this selloff before the deeper sell.

Comment:

Closed shorts as the index rests at the channel TL on extension of XB line; a likely place for a bounce. Could sell a bit more Thursday, could rally from here.

Would be a rookie move to short now; wait for a rally fgs!

Trade active:

Shorted the weak rally near EOD. 10 contracts each on SPY, DIA, QQQ, IWM.

Expect some residual selling on Thursday, weakest day of the week statistically.

Hedged with Friday's weeklies, shorted OTM puts on $4 spreads.

Comment:

Closed shorts bought a few calls on chance of a bounce and got rewarded. The Doji looks like a Hanging Man; any bullishness here is a fakeout and Bull Trap. Don't get sucked in! Short rally to the TL around 290-291 SPY; 2900 SPX; 263 DIA if it gets that far.

Trade active:

Index hangs at the 0.618 Fibo = 26,571.

26,783 = 0.786. Would take a positive global news flash to get there IMO.

In DIA 265P Nov contracts; short 11 Oct OTM weeklies.

Comment:

Click Play to see the market fill in this chart! LOL looking good atm. We got Death Cross in DJT & RUT. Hang on to ur hats! I wouldn't short weeklies later than October strike dates...

Trade active:

FYI folks closed the position waiting for re-entry. Any gap down stands chance of getting filled and this was a big one, driven by 'trade fears' and global 'fake news', most of which is perpetrated by The Donald. SO, likely to get at least some retracement. I bought some AMD & GE in covered calls while we wait. Not ready to buy calls just yet but it was time to close out some puts for ~30% gains. Not bad for a day's work!

See my related post on Harmonic Theory. Still not sure if that will pan out or whether we get bounce off the lower TL back into triangle. It is still a Bull Market for the time being and I still expect higher prices EOY, but it's gonna be a rocky road IMO. Very chancy here!

For this particular idea; notice we are trading just above the rising TL of bottom channel; this COULD be a retest of lows and a higher move MIGHT be around the corner, or at least an upper channel test if it becomes range-bound. Nothing is certain; take what you can get when you can get it!

Comment:

Waiting for EOD to see how it closes for re-entry. Missed getting back in at 2PM rally b/c I was sure it would close that gap, Powell stopped it cold.

Might get some short covering EOD, but triple combo punch of Trump foreign policy + Powell "This ain't QE!" and China tariffs go into effect on 15 Oct makes setup for a deep selloff IMO. Could start Wednesday IMO.

Trade active:

Back in Nov SPY 290P and Nov QQQ 188P on $5 Bear spreads. Looks Bearish IMO,
9 minutes ago
Comment: Added IWM Nov 147P spread against Friday 144s. Good luck folks!
just now
Comment: Added 10 Nov DIA 263P spread against Friday's 257.5; looks like a failed TL retest.

Now re-established half my position; add if we get another rally.

Trade active:

Added 5 more contracts to each position; now in 45 Nov puts on 4 major indices.
Moved down so quick I had to roll some of the short legs on Bear spreads, lol.
Always do that for a credit, never need take a loss on those short contracts!

IMO a serious correction can start very soon; now rumors circulating that trade talks have stalled before they started. China is getting irked and hostile, Trump accuses them of human rights violation, they ban our footballers, and tariffs kickoff next Tuesday. IMO if Trump gets pissed at them he will jack tariffs more and blow up the whole mess. A deal now seems a remote possibility at best IMO.

Today Powell told us "THIS IS DEFINITELY NOT QE!" repeatedly. So no more rate cuts, as expected. Hold inflation near 2% and stay the course, he said.
The downtrend course, LOL. Gone short again; GLTA!

Trade active:

Reduced position to a 5 contract calendar spread on the technical pullback.

If China is ready to make a deal as they hinted today, then all short bets are off.

R/R is poor again; resting at TL support, strong bounce today; (+) news will explode it up into channel, stay cool, be safe!

Comment:

Rumor mills grinding fake news; sell-buy-sell-buy; dont' get caught in BS. Just waiting for real news. If Chinese delegation goes home early then sell the Hell out of it!

Trade closed manually:

Closed all stops out waiting on news. R/R terrible; pure gambling now.
When direction is clear then bet on the trend IMO.

Trade active:

OKAY! "Buy the Rumor, Sell the News"; I am short again and selling the news of a small partial deal to trade soybeans and suspend 15 Oct tariffs. The terrific enthusiam of past 3 days carries indexes to 100% retracement from 01 October prices; it is a Batwing formation. Last time we got this was in Nov/Dec 2018.

I doubt we get a severe decline just yet, but expect that huge AM gap to fill back down and likely test bottom TL again within a week.

Shorted QQQ; in Nov 192P spread against Oct 188P; SPY 300P spread vs Oct 295P; DIA 270P spread vs Oct 266P; and IWM Nov 152P sperad v Oct 148s.

So, $4 bear diagonal spreads trading next month vs this month's weeklies.

GLTA!

Trade active:

Added in post - market to all four positions now holding 25 each Nov puts on above indices, 100 ITM puts on position; these moved so fast I was forced to roll the short weeklies out to next series and down $3 so these are now $7 Bear Spreads. Have a great weekend all!

Comment: After the news release, it seems we got an exhaustion gap with a shooting star from open > close.

If we close the gap up with a gap down Monday in light holiday trade, it would give us the 'Abandoned Baby' Doji- extremely Bearish.

Trade active:

Last time we saw this string of gaps up was 29 Aug - 12 Sep. Been running pretty hot for October past 2 weeks; IMO exhaustion gap and retest the TL and high prices on Tues 10/15. Expect imminent rollover; possibly might still test ATH. I am short!

Trade closed manually:

Not behaving as expected. Seems like a push to retest ATH in progress. R/R lousy again; take what the market gives and be cautious:

Seems like bullish undertone persists. Advancers > Decliners; breadth firms up; IMO this beast wants to retest the ATH. Useless to hold shorts while it does this; but too risky to bet that it will. Sidelined again; stop lossed. Look for blowoff rally to re-enter. R/R poor again until we get a clear signal IMO.