SPX - SPY Getting close to sell zone to Gartley, or Bat pattern
Last month (May 7) we proposed a chart with the pink ABC trail. so far we're on track.
Now we can see that the A wave and B wave have made pivot turns for us.
We are now in the pink C wave up.
This is getting really interesting now as we approach the short sell zone shown in the red box.
We are looking for the top of the pink C wave, which of course will complete the bigger green labeled (B or 2) wave.
We are in a bear market and are playing the wave counts in a bearish down direction.
Final high Price targets are at the end of possible Gartley (yellow) or Bat (blue) harmonic patterns.
An interesting line is the heavy black resistance line that we have talked about in the past. It connects the Jan 2018 high, the Oct 2018 high, and the July 2019 high.
This line should provide tremendous resistance to the advance from the march 2020 lows. We could expect a sudden drop once this line touched maybe around 3020-3030. We then might find a second attempt to go over it again for a day or 2, just to result in an eventual failure and drop back under the line. This "hidden" black line means something.
At this point the daily rsi (not shown) does not have any divergence. We would like to see the rsi drop and then a weaker recovery as price shoots higher creating the divergence we like to see. That will give us another clue about the future expected drop.
Finally, lets keep our eyes on possible time analysis.
We had 23 brutal down days in March. We can look for possible completion dates that are 2.236 or 2.618 times longer. Thus we can look for June 5 or June 17th as possible turn dates (+/- 1day) ... we'll see. Note- We have seen the turn dates go out as long as 4.236 times longer after sudden drops also.
We are now looking for possible topping patterns of price and time. It would be nice to have the psychology of the market "all in"and extremely bullish soon. Thus we can take the contrarian short sell side.
Now we can see that the A wave and B wave have made pivot turns for us.
We are now in the pink C wave up.
This is getting really interesting now as we approach the short sell zone shown in the red box.
We are looking for the top of the pink C wave, which of course will complete the bigger green labeled (B or 2) wave.
We are in a bear market and are playing the wave counts in a bearish down direction.
Final high Price targets are at the end of possible Gartley (yellow) or Bat (blue) harmonic patterns.
An interesting line is the heavy black resistance line that we have talked about in the past. It connects the Jan 2018 high, the Oct 2018 high, and the July 2019 high.
This line should provide tremendous resistance to the advance from the march 2020 lows. We could expect a sudden drop once this line touched maybe around 3020-3030. We then might find a second attempt to go over it again for a day or 2, just to result in an eventual failure and drop back under the line. This "hidden" black line means something.
At this point the daily rsi (not shown) does not have any divergence. We would like to see the rsi drop and then a weaker recovery as price shoots higher creating the divergence we like to see. That will give us another clue about the future expected drop.
Finally, lets keep our eyes on possible time analysis.
We had 23 brutal down days in March. We can look for possible completion dates that are 2.236 or 2.618 times longer. Thus we can look for June 5 or June 17th as possible turn dates (+/- 1day) ... we'll see. Note- We have seen the turn dates go out as long as 4.236 times longer after sudden drops also.
We are now looking for possible topping patterns of price and time. It would be nice to have the psychology of the market "all in"and extremely bullish soon. Thus we can take the contrarian short sell side.
Comment:
We have now hit 3120 . Lets watch out for the black line overhead... see if strong resistance holds
Comment:
1 hour candlestick chart "magically" turned red at the black overhead resistance line.... we bought a lot of long term puts out to Dec 2022... now lets see if we get a good pullback in next few days/ weeks just to gather more steam and try to break above the black resistance line. That would set up a nice divergence in daily RSI... maybe eventually going for the BAT pattern. If that happens we'll load up more puts. That would be even better than todays buy. Both patterns provide an extremely low risk trade compared to the ATH set back in Feb 2020. Remember pink wave C could equal .618 x the length of the pink A wave as shown. We now have 1/2 of our long term put positions today... will deploy other 1/2 of trading capital (for this trade- not the whole account) if we tag the .618 C wave near the Bat completion. Good job everybody for being so patient!
Comment:
We got very close to the wave C at the .618 x length of wave A on Monday at the close around 3232. we bought the other 1/2 of our long term put position. Time analysis was looking for a high close on June 5 (+/- 1 day). We look at June 8 as +1 trading day) as the possible high close. Also of note, the gap up above the black resistance line shows the hidden resistance there. This could be a potential island reversal set up. If we gap back down below the black line, it would complete the island reversal pattern. Lets see what happens after the FED speaks on Wednesday
Comment:
There's the nice island reversal. Good job everybody on the puts. The black overhead line should contain any more bullish market movement. As we write this Friday afternoon, the huge sell off on Thursday shows that "never fight the FED" is not always correct. Keeping interest rates at 0 for 2 more years, flooding the economy with trillions$??? Lets keep on doing what we're doing and simply trade the chart in front of us.
We may see a short term bottom next week, calling wave 1 of 3 down. Then we should see a wave 2 of 3 up. Maybe the market will attempt another rally. This would convince the "buy the dip" crowd to pour more money in.... however the black line of overhead resistance should hold down and limit future rallies
We may see a short term bottom next week, calling wave 1 of 3 down. Then we should see a wave 2 of 3 up. Maybe the market will attempt another rally. This would convince the "buy the dip" crowd to pour more money in.... however the black line of overhead resistance should hold down and limit future rallies
Comment:
Think we saw SPX put in the wave 1 of 3 low down near 2980 this morning. Sold our puts near the open, bought calls... for a short term trade. We are now in a wave 2 of 3 wave bounce.... fake out rally.... thinking we will see SPX get up near 3120-3130 area near the underside of the black resistance line. That line should limit any more bullish moves. When that area is "tagged", we can again short and get ready for the faster wave 3 of 3 down. This could get very scary for the bulls that are still convinced to buy the dips and falsely believe that the FED has their back! Lets allow a relief rally this week, but patiently look to short again soon to compound our profits from the past week sell off... more to come - plenty of downside to go, just remember it stairsteps down, not a straight line
Comment:
Sold our calls for a nice profit near the open this morning. Now have puts. Very interesting that price opened on the black resistance line today. Then went above briefly, then collapsed below it, just to struggle back to the underside of the line at the close.
If this was the wave 2 of 3 top, then next target below could be around 2774!
If this was the wave 2 of 3 top, then next target below could be around 2774!
Comment:
Todays price action got close, but did not take out the June 19 price high. We bought more SPY puts near the open. SPX may be setting up a smaller wave 2 within the 3 rd wave down... next few days should sort this out for us. We are holding our July 17 puts.
Comment:
Ahhh, there's the break. Left us a daily shooting star candle (abandoned baby) candlestick pattern. If we are starting the 3rd of a 3rd wave down, we may see a gap down tomorrow or next few days. Let's watch for the gap fill left back in May near 2955... this could get fun for the bears
Comment:
... watch for the gap to fill...
Comment:
Friday June 26, left the SPX near the lows at the close. We should see a hard push down if we are about to see the wave 3 of 3 down. However on a smaller time frame the rsi looks like we may be getting ready for a small reset... possible C wave up to complete the wave 2 of 3. So lets see if we get the hard drop soon, or if the market "hesitates" a bit first, gathers more energy, and then begins a strong breakdown. Keeping long term puts, but might buy calls for a short term bounce Monday-Tuesday. Going onto 4th July short week.