The two dashed Fibonacci points show the path of the short trade that I covered today - from 0.75 retracement down to a 1:1 extension.
And now at the day close SPX has formed a very strong hammer shakeout pattern through the 1:1 so good chance it will reverse and it now looks a good setup to go long if it does pull back at all. If it happened to pull back to the 1:1 fib at $4253 that would be ideal to take on less risk having witnessed that hammer and with a stop loss below the hammer low but not sure if SPX will lend that opportunity. An aggressive trader could open a long here with stop loss below the low but I wont be doing that. Perhaps there will be a pull back to a LTF MA to get in on - we'll see.
Anyhow, regardless of strong hammers this is very clearly a crash structure. Any higher time frame chart now shows this is going to be a disaster crash sooner or later.
But I am wondering if this may be a rinse and repeat scenario with another X wave pushing up to explore the 0.618 fakeout reversal area potentially to 0.75 yet again.
Interestingly if it did get there would be plenty of structure to engage with and form shakeout patterns - the 200MA, left shoulder of H&S as well as the supply trendline, so there is much for price to be attracted towards above.
The left shoulder may be a stretch too far but this is a good moment to show that I believe the shakeout pattern reversal extremity to be 0.786, which is just shy of the left shoudler. In indexes it appears 0.72 - 0.75 is the common area. FX 0.7, GOLD never gets much passed 0.618. But I believe 0.786 to be the extremity because it is the square root of the multiplicative inverse of phi - 0.618, and charts are nothing but an expression of phi... So it could get up to 0.786 potentially and still be a retracement.
If it did get to this area it could provide a great short yet again because there would likely be a lot of selling pressure coming in. Having dived back down following the death cross I dont think there is much chance it can pass the supply trendline, at least in this phase.
That said it could be a shallower retracement such as the 0.5 which could also engage with the 50MA and so I'll be watching out for upper wicked candles in that area also.
- from herein I will be using the term "shakeout pattern" instead of "fakeout."
Not advice.
And now at the day close SPX has formed a very strong hammer shakeout pattern through the 1:1 so good chance it will reverse and it now looks a good setup to go long if it does pull back at all. If it happened to pull back to the 1:1 fib at $4253 that would be ideal to take on less risk having witnessed that hammer and with a stop loss below the hammer low but not sure if SPX will lend that opportunity. An aggressive trader could open a long here with stop loss below the low but I wont be doing that. Perhaps there will be a pull back to a LTF MA to get in on - we'll see.
Anyhow, regardless of strong hammers this is very clearly a crash structure. Any higher time frame chart now shows this is going to be a disaster crash sooner or later.
But I am wondering if this may be a rinse and repeat scenario with another X wave pushing up to explore the 0.618 fakeout reversal area potentially to 0.75 yet again.
Interestingly if it did get there would be plenty of structure to engage with and form shakeout patterns - the 200MA, left shoulder of H&S as well as the supply trendline, so there is much for price to be attracted towards above.
The left shoulder may be a stretch too far but this is a good moment to show that I believe the shakeout pattern reversal extremity to be 0.786, which is just shy of the left shoudler. In indexes it appears 0.72 - 0.75 is the common area. FX 0.7, GOLD never gets much passed 0.618. But I believe 0.786 to be the extremity because it is the square root of the multiplicative inverse of phi - 0.618, and charts are nothing but an expression of phi... So it could get up to 0.786 potentially and still be a retracement.
If it did get to this area it could provide a great short yet again because there would likely be a lot of selling pressure coming in. Having dived back down following the death cross I dont think there is much chance it can pass the supply trendline, at least in this phase.
That said it could be a shallower retracement such as the 0.5 which could also engage with the 50MA and so I'll be watching out for upper wicked candles in that area also.
- from herein I will be using the term "shakeout pattern" instead of "fakeout."
Not advice.
Comment:
Breaking down here as markets open i've re-entered my short and some FX trades.
Comment:
SPX has arrived in a rush to the 1:1 area and how this area holds, if at all, will hopefully reveal the direction of trend. I have my bias, I'm already short - that gap down was bad news, but lets see. If it did get above the bounce top then a much bigger bounce could be on.
Comment:
I guess I dont really need to come back and discuss the direction of trend 😄. Now into the next wave down and could be the real crash - we'll see.
Comment:
Sudden bounce could be a short covering really here at the previous lows and also crossing a previous supply trendline.
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Will know more if/when it gets to back to 4253 1:1 area.
Also worth noting that /USD FX pairs have been sharing similarity with SPX recently which seems to happen at critical junctures and they are bearish since this bounce top a few hours ago