Next few weeks mapping
28Oct Top: 1980/2000
31Oct Close: 1966 (small weekly )
Nov W1 Range: 1970/1890
Nov W2 Top: 1970
Nov W3 Dec W1/2 Crash: 1650 BUY! Potentially 2550 in early 2017.
Short 1980/1990 Stop 2030
Buy 1850 Dec Puts.
Take Profit: 1650
1 – Fundamental: The tepid growth can’t drive the rally further from these high grounds. A Decent Reset is in order.
2 – Fundamental: US Tapering, Nothing coming from ECB that the market liked.
3 – Technical: Rally 09 = Rally 11 in percentage ~100%
4 – Technical: Rally 11 Supporting line clearly broken below.
5 – Technical: Correcting 38% of Rally 11 is in order (That is 18% down from September top) – 1650 target
6 – Technical: The 125d has just turned negative 10d ago, it has called for large corrections in the past. (good obervation from a tweet)
7 – Relative Considerations: Rates pointing lower, Credit unable to tighten further, Small cap (R2k) unable to perform for a while, DAX Close to bottom and unable to jump so far, Nasdaq/Apple Capped here..
7 – Game Theory: No better time for a crash than when the least Expected. We had 5 Santa Claus rally in a row. I bet this year is different.
Note: the correction in 2011 was also one that corrected 38% the previous move up from 2009 (in weekly closes).
If you are not short: DO NOT STAY LONG Nov W3 to Dec W2
Little to win, loads to lose...
From here there is a risk of shoot up to 2140 if Draghi annouces something on the 4th of Dec that the market like.
Overall: more likely to recede against this line but the market has been very surprising lately so I remain open to this idea.
Maybe buy 1200 Dec16 put and see how it behaves for 3months. Either take profit quickly or exit flat after the next correction to 1950 if 2140 is hit in the next 6 weeks.