DaddySawbucks

Sand Path to Ultimate ATH 4K: Road Map for 2020 and Beyond

Long
TVC:SPX   S&P 500 Index
Pure WAG and sheer speculation. Absolutely NOT investing advice! This post is strictly for your amusement only; intended purely to entertain, so enjoy!

NB: Near-term some sort of correction is due, index trading >2SD above 50DMA, RSI overbought near 80; absent a Fed Hike on 28/29 Jan, expect a modest pullback.

The monster break of Feb 2018 is unlikely to repeat now without adverse Fed rate action, but ofc anything is possible in this nutty market- not for faint of heart!

In 2019 every correction started on the day of the Fed meetings, in May, July and September... IMO history likes to repeat, seems like a good bet. Could start now, from Friday's close at 3330!

The down move could be a 6-10% correction, deeper is doubtful, but possible; it's a 4th wave and these tend to be tricky trading.
Expect wild choppy swings like we saw in August- whipsawing, don't get your hands cut off! Save ur cash for Wave 5, it will be a terrific long play!

After this move completes, what comes after is anybody's guess, but this market has shown a proclivity for double tops, IMO is likely to do so again; pre-election jitters likely may start a deeper correction in Sep/Oct. We had a Bullish October in 2019; a Bearish one in 2020 is a likely consequence IMO. Beyond the election: entirely depends on the Donald pulling off re-election; as an incumbent with enormous cash to burn, his chances are better than 50-50 IMO; I expect him to win it, when he does, markets will rocket to the Moon- the 2.618 Fibo extension is certainly within grasp up around 4128!

Again, this post is pure Wild-Assed-Guessing, the tail WAGs the dog, GLTA! Be careful, be cautious, be prudent at this juncture! -DS
Comment: See embedded comments below; brief synopsis; we find ourselves in the Second Drive of Three Drives to the Top to 2020 ATH:

Near-term correction (4th wave of Second Drive) tar box: 3064 - 3112;

Intermediate-term next ATH (Third Drive) tar box: 3448 - 3587;

Deeper secondary correction tar box thereafter: 2800-2880 (From chart, 2840 +/- 40 pips; note the zone of prior resistance in 2800's from Jan 2018 becomes support for the next correction!)

Final bull wave, Fifth-in Fifth of Five explosive melt-up after re-election going into 2021 of Primary Trend Century Wave to PE 30: 3996 - 4128.

After which, as The_Unwind glumly enjoys to predict; The Great Crash of 2022!

GLTA! See you at the top (and bottom thereafter!) my friends! :-) DS
Trade active: Tested 3332 again and rolled right over. IMO this the ceiling; now in Feb SPY 332P.
Comment: It sells...
Trade closed manually: Anytime you get a monster gap like this I close out. Most gaps fill eventually. This one may well fill this week to give a double top before it really starts to rollover.

Made bank off the gap; we take what the market gives us. Some $2 contracts went for $10 and the VIX Calls jumped ferociously at the open, closed VIX positions when $18.85 first thing, you knew that wouldn't last long!

Consider buying puts on UVXY; on a bounce it fades geometrically.

look to re-open positions on a bounce. For now I wrote bull spreads on QQQ and SPY, long the March ATM contracts, short Friday 31 Jan in $3 spreads.

If it sells more I got good prices on the short legs, ~1.10 for OTM contracts that traded on Friday for $4.40, wow it sure sucks to be that guy! Brutal...
Trade active: Entered a bear spread on UVXY, long the Feb $13 put, short the 31 Jan $12 put.
This ETF fades exponentially as time decays (credit to Hungry Hippo for this idea!); time is always on your side in this trade, should markets lift here the VIX will fade rapidly, is already more than $1 off opening highs!
Comment: Futures greening up if AAPL beats it will explode again; IMO it's in Three Drives, going to 30k/4k/10k.
Trade active: Back in the game! rolled my bull spreads into bear spreads; now short all four major indexes and also long the VIX in Feb 16 Calls on spread against $24 for net debit $1.5.

Has all earmarks of a bear rally, a counter-countertrend move, likely fail after FOMC.
Comment: Taps the 0.62 Fibo retracement, might be another leg up to 0.786, mioght not; entered shorts and added; GLTA!
Comment: Likely to fill the gap down from Monday even if only for a few minutes before it really goes down in earnest. Typical 2nd wave behavior!
Comment: Gap filled, touched TL from under, and rejected. Futurz briught red... this is a typical ABC pattern; B wave completed on the Powell comments IMO, so predictable! Haha I love it when it's easy! Shorted at 2PM. Added. In 170 spreads now; 140 bear spreads on 4 major indices and 30 bull spreads on VIX. RUT never really got back very high and my spreads stayed green all day, imagine! We've seen this pattern before many times, it will sell to beat Hell now iMO. GLTA!
Trade closed manually: Again closed on the opening gap looks like it might double bottom and bounce from TL. Lets see!
Trade active: Price makes a higher low. Taking a long shot here; just writing a few bull spreads on SPY/QQQ/DIA. Buying March/April contracts shorting Fri 31 and Feb 07 calls.
Comment: Well well, the bullishness became so insane I had to roll the damn short legs twice, useless to write spreads here just go long contracts, simple. Don't plan on holding these long, certainly not over weekend. Monday could be bright Red again!!
Comment: Fascinating read; I do think this can get higher, but IMO some more pullback is in order: https://www.marketwatch.com/story/do-not...
Trade closed manually: More whipsaw! Amazingly I made +$ on the short legs and came ahead at the open, closed all positions, this weekend is gonna be a tricky business IMO! GLTA!
Comment: Looks like the week of 2-10 May. If it plays like that, could rally back to resistance and then rollover; or if we in a 3rd wave down it will just tank off Monday. Looking for short entry...
Trade active: Went long on QQQ on April bull spread; shorted equal number of SPY bear spreads in weekly. Might be another day of tanking left; or Monday could get Bear Rally... GLTA!
Trade active: Rolled the calls into puts... all gaps fill, Friday's gap is filled, we trade at former support, now become resistance; today's gap will fill as surely as the sun must rise in the East, IMO! GLTA! Still got a gap to fill at 295 on SPY...!
Comment: Added to each pos and entered IWM bear spread; now in 60 spreads on 4 major indices.
Trade closed manually: Closed out shorts for a very nice net on the day. If this monster starts to rally again from here the lovely gains from rolling puts will vaporize, take profits when offered IMO. Watching, waiting for next signal! Expect some more volatility, might be choppy for a while but IMO the big sells are probably mostly done. Could give an inverted H&S, if Friday's sell was the Head, we got a right Shoulder soon.
Comment: Wow... wow. Where did it come from... where going? ATH? Pump-dump?! Wow!!!

If exhaustion gap will close soon, but a runaway MOMO/FOMO is going IMO...?!
Trade active: Shorted the rally. All four major indices, ten bear spreads on each. Want to short TSLA but contracts all stupidly expensive, fageddaboudit! Looks like a double top with divergence in averages IMO. GLTA!
Comment: Expanded flat to a double top IMO> Added to DIA /IWM positions. +900 in 2 days ffs! Melt-up Madness!! LOL L@@K @TSLA... Finally shorts got revenge!
Trade active: We got an expanded irregular flat going on with double top, second peak higher.
These crack hard... holding shorts and rolling the short legs in bear spreads for fun and profit.
Drawdown in long legs on 31 March put contracts is nominal, VIX is not crushed.
No telling how high is too high, feels like it draws closer now. Won't be long IMO.
Comment: Yes it's pretty clear x-flat pattern, stopping near upper TL in megaphone; the C leg selloff could be hellacious! Added to shorts and rolled short legs out and down for realized gains on weeklies. Holding 31 March ATM Puts on long side of spreads.
Comment: Surprisingly my drawdown on the bear spreads is <5%, VIX is not crushed at this price level yet and puts hold value well, Vega is steady and Theta is long. The weeklies net credits are almost 3x my drawdown, target on course, on glidepath! Stay the course...
Trade active: Full press short now; in 80 bear spreads, 20 each on all four majors. See post below on harmonic bat pattern!
Comment: NYSE A/D ratio has dropped from 9 on Weds 2/5 to 0.8 today, 2/6; internals are terrible; only 13/30 DJIA stocks are up; most are declining in rising market. Prices propped up by handful of issues- BA, MSFT, AAPL, Disney, Walgreens account for nearly all the 90-pip lift.
Trade active: Looks like a Bear leg incoming. See related post!
Trade active: See related recent post; looks like after this double top, a pullback to retest the 3230 price is likely, should bounce again to give a right shoulder in the following week (shown as point 'B' in chart); final weaker 3rd rally should provoke a Bearish reaction to dig down to lower TL and hit the 3210 target. A bounce from there into April/May could carry prices to the ultimate stupid ATH...!
Comment: Amazing sell, more than I expected, or most folks I reckon; now taking positions on VIX, in March $20 puts and UVXY April $15 puts. VIX wont stay up long even if prices consolidate here it will quickly relax as panic subsides; UVXY will rapidly decay as the futures contracts in this ETF approach expiry. Took 10m contracts each to start.
Comment: Asian markets appear to have bottomed overnight... probly real close to end of Bear campaign here IMO
Comment: AmAZING. IN Disbelief. 3k in 3 days. The rally will be fantastic, stupendous, don't get caught short!!
Trade active: Going LONG. In SPXL; market internals today on Friday 2/28/2020 are same extreme Bear mode as 24 Dec 2018, strongly suggests pivot from this support; see this post:

The number of NYSE-listed stocks that have hit new 52-week lows have spiked up to 946 in morning trading Friday from 694 the previous session and 100 at the end of last week. That's the most new lows seen since Dec. 24, 2018, when the Dow Jones Industrial Average DJIA, closed at a 15-month low. The Dow dropped 963 points in morning trading toward a 14-month low. Meanwhile, stocks making new highs spiked down to 4 from 26 on Thursday and 248 last Friday. That was the lowest number of new highs since Dec. 26, 2018.
Link:
https://www.marketwatch.com/story/nyses-...

Comments

At this point, I think it's safer to buy the dips than to short the market. I've decided to continue playing day by day instead of shorting the market.

We may just get a sideways drift in Feb/March because there's no rate change or tariffs this year.
+3 Reply
bkidd7 hungry_hippo
@hungry_hippo,

Almost all bears are becoming bulls. The bulls, and TV talking heads, are mocking the bears, "how could this market possibly drop". We are at a rate extreme, and the herd will be running for the exits soon.
Reply
@bkidd7, even if we get a tank like Feb 2018, keep in mind that NDX actually hit a new high in March.

Also we are in an unprecendented situation where the US economy is growing while Euro rates are negative. I also want to point out the at SPX dividend yield has gone as low as 1% and we're at 1.7%.

If you were alive in the DOt Com era, you'd know how stupid the market can get. APL is driving the market and PE ratio is still under 27, which is actually about average for a tech stock. AMZN announced record sales.

I doubt we see a major move down until we see inflation and the Feds are forced to raise rates. That's what eventually collapsed the Dot Com bubble. That won't happen until next year.
Reply
bkidd7 hungry_hippo
@hungry_hippo,

Agree. This is not a Dot Com yet. We are in melt up that is not ending any time soon. Sharp corrections happen during melt ups though. I think we are due for a sharp pull back, up to 10%, and then the market moves back up to ATH's again, within a couple months. Any sharp pull back should be a great buying opportunity.
Reply
@bkidd7, that was my original thought, but I think this drop winds up being much smaller. All of the previous big drops were caused either by rate increase or tariffs, Neither is happening this month.

So we get a small drop and the melt up continues until we see inflation or Bernie leads the election polls. One of those 2 events will end the rally.
Reply
@bkidd7, When the last Bear throws in her bloody towel it will tank off to beat Hell.
Reply
hungry_hippo DaddySawbucks
@DaddySawbucks, not really because Europe has negative rates. ECB meeting Thursday and Fed meeting next week determine the direction of the market and if it drops, how much.

Shorts are getting squeezed out of every stock, so when the drop happens, it will be big and sharp because there won't be short sellers buying.
Reply
DaddySawbucks hungry_hippo
@hungry_hippo, Right on. Shorts all squeezed out already, Im trackin u bro. I see them getting killed every day from 2-4PM; that's when forced liquidations from brokers buying to cover failed trades on unmet margin calls hit the wires. Each broker has a different house rule; E*Trade will stop you out at 14:01 if margin not met. The pushup on Friday was less than Mon - Thurs, suggests IMO most have been closed out by now...

To catch this drop you gotta be in it the day before; but we never know when that day will be; "Aye, there's the rub!"
Reply
hungry_hippo DaddySawbucks
@DaddySawbucks, that's FOMO thinking, the way I look at it is that if I miss the drop, I can always catch the rebound.

It's not all just a short squeeze, Germans are definitely pumping futures, which is why it's melting along the upper trendline. Negative interest rates are unprecendented, especially in a growing economy.
Reply
hungry_hippo DaddySawbucks
@DaddySawbucks, look at DAX futures today, US market isn't even open and they still got a pump in the afternoon. So did Mexico, though not as much.
Reply
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