S&P 500 Cup and Handle

SP:SPX   S&P 500 Index
On the above 4-day chart price action has corrected 10% from the 4600 summer high to find support on the Golden ratio. A remarkable moment now exists to have long exposure. Why?

1) RSI and price action resistance breakouts.

2) Support on 2022 resistance. What a signal!

3) The Cup and Handle pattern confirmation is textbook. The handle breakout follows strong buyer demand on the Golden ratio. This only happens in a technical bull market.

4) The sentiment, overwhelmingly bearish. The Put/Call ratio (2-week chart below) tells us dumb money is massively short. Retail traders have not been this bearish since the Covid correction of 2020. March 2020 was the buying opportunity of a lifetime. November 2023 will be the next date history records as an opportunity no one saw coming. Cough..

5) The target is straight forward enough. The depth of the cup is taken from the bottom of the handle to measure the target. 5500 sometime in 2024.

6) Gold bugs, seriously? If this happens..

Is it possible price action corrects further? Sure.
Is it probable? No.


Type: Trade (not investment, will explain why elsewhere)
Risk: The farm and your neighbours farm.
Timeframe for long: Remainder of year.
Return: 30%

Monthly Put/call ratio
Trade active:
The 2023-24 melt up is beginning.
Just a thought to share.. it has come up a couple of times.
This rally could become the most hated rally the stock market history. Why?

1) The folks that are going to benefit from this rally do not need it. They are already wealthy. The Rich/poor divide shall likely be greater than it has ever been by the time this rally ends. How are the masses going to feel at the end of that?

2) The put/call ratio chart shown above informed us some months ago retail investors have exited the market at the worst possible time. How are the masses going to feel at the end of that?

3) The same retail investors have never been more squeezed in terms of earnings and high inflation. Stories of folks living pay cheque (Queen's English) to pay check (Americans.. we need to talk about this), living off credit cards, payday loans etc are all coming to the surface once more. This is horrible. There is no extra cash to invest with. How are the masses going to feel watching this market run away?

4) Throughout history these melt ups shall see folks enter at the top. It happened at the dot.com bubble. If you do enter around the top it could take 6 to 8 years before a return is seen. Hence, the most hated rally.
All bets are off..

“Burry’s Scion Asset Management closed out two short positions against ETFs tracking the S&P 500 and Nasdaq 100 indices between June 30 and September 30 in the form of $887mn and $739mn bets against the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ ETF, respectively, according to a recent filing with the Securities and Exchange Commission.”

Price action is storming back to the all time high of 4600. This will be resistance.
But... what if...
What if daily candle bodies close past resistance as support?
That will mark the start of the melt up frenzy.
When resistance confirms at 4600, long again from 4400.
Price action almost at the all time high once more. At the same time retail traders have loaded up Put contracts (Shorting the market). One of two outcomes ahead:

1) This is the easiest short trade in the history of history as led by the herd.

2) Everyone is wrong.

Which will it be?

4-day put/call ratio. Notice the bearish divergence anyone?
Summer's resistance now in the rear view mirror.
Trade active:
Please disperse, nothing to see here.


Trade active:
Get yer moon boots on. You may have noticed the majority of participants are now calling 'The double top has confirmed'. Latterly the number of Put contracts has spiked upward as bears increase the value of their short positions.

Who needs a Netflix account with this much Drama?
Did you get your moon boots on yet?

From the messages received I know there's more than a few folks that do not subscribe to tea leaves that is Technical Analysis. Regardless that prejudice will not be heeded by the chart.

Do you know what the 3-day candle that just printed below is? This is a Dragonfly DOJI candle, it has just printed with the close of today's trading. This candle prints as "Short sellers" increase their positions!

More fascinating is where the candle printed (orange circles), it is now the reason why there is a high probability for a strong uptrend.

3-day S&P 500

1-day Put / Call ratio
1st resistance at 5050.
Trade active:
Still 10% to go until target. Remember target does not mean correction follows.

Astonishingly shorts sellers are buying more Put contracts. Welcome to the mother of all short squeezes.

Jan 24th "1st resistance at 5050."

How did I know?
Answers below... (hint the clue is in this thread)
Boom, bye bye 5050. The short sellers are toast.
It was with some delight observing the jump in Put contract purchases.
When will they learn?
The lesson: Never short into momentum. Don't even think about it, it'll cost you.
310pts until target.
Did you see what just printed on the 2-day chart?
Trade active:
A few folks messaged with the correct answer from the last update above, you're now reaping the rewards.

On March 12th price action printed a Hidden Bullish Divergence, it is one of the most bullish signals you have amongst divergencies.

Only another 4% until target.

NOTE! Target does not mean market top!!

You all catch this dip for cheap?

Only 1.5% from target. Amazing call when considering how bearish the market was at the time of publishing. Price action is almost at the 1.618 Fibonacci extension. You will also notice the bearish divergence between price action and RSI. My expectations for the market going forward will be written elsewhere.

5 day
Trade closed: target reached:
Ka-boom. Thanks for playing.

Is it over? Massive correction next? Actually, you may be horrified with what is about to happen.

This is not going to end well for short sellers...
A time will come for the "short" trade of the last 30 years I'll wager. But that time is not now.


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Allow 3-6 months on ideas. Not investment advice. DYOR

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