SPY Update - how I use invalidation to my advantage!
Sorry, forgot to turn off my second chart... make sure you are looking at the chart on the left when doing this... though, both are relative
As we can see, my game plan for today was to WATCH for a confirmation of a wave 1 - 2 setup to indicate that Wave 4 (wave "iv" in white) would be complete and that we would start the 5 wave count down for Wave 5 (wave "v"). But now that set up to watch for is invalidate (the red numbers 1 - 2 are what I was looking for today).
So, what now?
1) this is why I say be patient and let the set up get established! Where my invalidation was set at 281, this was in alignment with the .618 fib retrace and within the zone of filling the gap. The key was to watch if this held as resistance, break down, and then backtest = that would be a pretty good confirmation for red waves 1 - 2 to be set up and completing
2) As the market progresses, we slowly start to get more confirmations of what form the structure seems to be taking. Game plan today had us in a Wave IV retrace, but, due to invalidation, this changed. Changed to now that instead of being in a wave IV, I now have it that wave IV and V have been completed, with wave V being at 272.
3) this actually supports my bias of leaning to the downside... How?! Because I like to see completed structures rather than structures in process. Game plan last night had us working on a 5 wave structure. When something is being worked on, things don't always go as planned. But now, if this is accurate, we now have a completed 5 wave structure! Being able to make projections based off completed structures helps to increase the probability of success!
So, my updated game plan:
1) I am currently SCALING into building a short position. As of this moment, and following my last night game plan, I watched for what I thought a wave 1 - 2 set up would get established. As that was invalidated, I didn't enter a position right away. Continuing to watch price action and reviewing the structure, I believe we are working on completing wave 2 (yellow (ii) numbers). I started a small size short in SPY. So, I entered when price was extending past the .618 fib. AGAIN, I am scaling in... I have a small position... this is why a plan is important and knowing your risk is critical... I will add more to my position when I see red waves 1 - 2 establishing.
2) I am looking for a wave 1 - 2 set up to become established. To help confirm yellow wave (ii) ends, I will look for a sell off / price dip (first indication wave (ii) is done). Then, my confirmation will be to look for a wave 2 retrace and print a lower high. This will signal that Yellow waves (i) and (ii) are in, and that we have now set up a wave 1 - 2 (circled numbers in red) for a 5 wave count down for yellow wave (iii).
As we can see, my game plan for today was to WATCH for a confirmation of a wave 1 - 2 setup to indicate that Wave 4 (wave "iv" in white) would be complete and that we would start the 5 wave count down for Wave 5 (wave "v"). But now that set up to watch for is invalidate (the red numbers 1 - 2 are what I was looking for today).
So, what now?
1) this is why I say be patient and let the set up get established! Where my invalidation was set at 281, this was in alignment with the .618 fib retrace and within the zone of filling the gap. The key was to watch if this held as resistance, break down, and then backtest = that would be a pretty good confirmation for red waves 1 - 2 to be set up and completing
2) As the market progresses, we slowly start to get more confirmations of what form the structure seems to be taking. Game plan today had us in a Wave IV retrace, but, due to invalidation, this changed. Changed to now that instead of being in a wave IV, I now have it that wave IV and V have been completed, with wave V being at 272.
3) this actually supports my bias of leaning to the downside... How?! Because I like to see completed structures rather than structures in process. Game plan last night had us working on a 5 wave structure. When something is being worked on, things don't always go as planned. But now, if this is accurate, we now have a completed 5 wave structure! Being able to make projections based off completed structures helps to increase the probability of success!
So, my updated game plan:
1) I am currently SCALING into building a short position. As of this moment, and following my last night game plan, I watched for what I thought a wave 1 - 2 set up would get established. As that was invalidated, I didn't enter a position right away. Continuing to watch price action and reviewing the structure, I believe we are working on completing wave 2 (yellow (ii) numbers). I started a small size short in SPY. So, I entered when price was extending past the .618 fib. AGAIN, I am scaling in... I have a small position... this is why a plan is important and knowing your risk is critical... I will add more to my position when I see red waves 1 - 2 establishing.
2) I am looking for a wave 1 - 2 set up to become established. To help confirm yellow wave (ii) ends, I will look for a sell off / price dip (first indication wave (ii) is done). Then, my confirmation will be to look for a wave 2 retrace and print a lower high. This will signal that Yellow waves (i) and (ii) are in, and that we have now set up a wave 1 - 2 (circled numbers in red) for a 5 wave count down for yellow wave (iii).