SPX may still have another leg up. Risk for bears has not passed
There's a lot of confident bearish sentiment around today as SPX is 3% down off news.
There was the first drop and then there was momentum follow through. The follow through of this has been a pretty good day trading short op for bears through the day - but a careful bear here should also consider the bear trap patterns in which we may be trading.
The full risk area for the original squeeze thesis was 4200 - 4250 sort of area minimum for a top. This may just be wrong (And there's various things to support why 4140 would make sense as a top) but if it is the right level - the fact we've sold off before it does not change the fact it will be the right level.
If we were to make a low in this area and rally the expected high would now also marry up with the butterfly high. A good confluence of signals.
The spike out (D leg) of the butterfly does not have to form. False signals of these will appear in all breakouts so it's not something you can base a trade plan on exclusively. But if we're getting signs of supports and the new development of small chart trend legs up this is certainly something to consider.
I think the big risk for this currently is in the 3980 - 3970 area. This is an area in which I am fairly bullish and very protective of any profitable short positions running (Day trades hit trailing stops recently).
If the market keeps breaking lower it will be easy to follow the bear breaks - but when things start to get easy it's always best to consider they may not be.
There was the first drop and then there was momentum follow through. The follow through of this has been a pretty good day trading short op for bears through the day - but a careful bear here should also consider the bear trap patterns in which we may be trading.
The full risk area for the original squeeze thesis was 4200 - 4250 sort of area minimum for a top. This may just be wrong (And there's various things to support why 4140 would make sense as a top) but if it is the right level - the fact we've sold off before it does not change the fact it will be the right level.
If we were to make a low in this area and rally the expected high would now also marry up with the butterfly high. A good confluence of signals.
The spike out (D leg) of the butterfly does not have to form. False signals of these will appear in all breakouts so it's not something you can base a trade plan on exclusively. But if we're getting signs of supports and the new development of small chart trend legs up this is certainly something to consider.
I think the big risk for this currently is in the 3980 - 3970 area. This is an area in which I am fairly bullish and very protective of any profitable short positions running (Day trades hit trailing stops recently).
If the market keeps breaking lower it will be easy to follow the bear breaks - but when things start to get easy it's always best to consider they may not be.