The Fed money printing is certainly making for a challenging time for technicians and ellioticians as market distortions and price-discovery breakdowns are at historic levels.
I have never in my time trading been as challenged as have been since May. While I played the down wave from Feb highs to March lows easily and played the rally from close to the lows to early May (as I counted 5-waves up from the lows) - I must admit the rise since then has certainly caught me by surprise and most pros as a matter of fact.
I trade for my own account and having the market go against you is certainly no fun as many of you know. I only post here what I am doing myself with my own money. I neither have a service to advertise nor do it for ego. I love this posting aspect of TradingView.com because it betters my own trading and forces discipline on me so I can go back and review what went right and wrong.
Markets lately have certainly humbled me though in the long span of 10+ years I have been trading I can't complain - having had far more wins than losses.
Having said that let's get to the heart of the current trade - the short SPX trade which I am in now.
There is no doubt what I have labeled as wave B has retraced the Feb-Mar crash to a very deep level and threatening now to reach all-time highs. While a Flat can have a wave B higher than the origin of wave A I still believe we won't make it to new all-time highs at least in the SPX.
There are of course no guarantees in trading, but the risk-reward I believe still favors heavily the shorts.
Several things to note on these charts :
1) On the left is the SPX showing how deep the SPX from April to August / Sep 2000 retraced almost an exact Fibonacci 88.6% (square root of commonly use 78.6% level) the drop from March 24 to April 20, 2000 - the initial wave down of the dot-com crash. I am seeing more and more lately this 88.6% level - a level which most Fibonacci indicators don't automatically include but which I highly recommend you include. You will be surprised how often the 78.6% is exceeded in waves 2 or B but end up reversing at the 88.6%.
2) On the right is the SPX now and as can see today we hit almost exactly the same 88.6% Fibonacci retracement of the Feb to March lows.
3) Further - we can see an ending diagonal forming since June 15th lows and today we hit and reversed exactly at the upper trendline of this ending diagonal.
4) Ending diagonals can be complicated creatures and go on and on with multiple sub-waves - usually confounding Elliotwave counts - but we can see 5 overlapping waves up each composed of 3 subwaves - as required by Elliot rules. It is common for the final third subwave of wave 5 to "overshoot" the upper trendline and quickly reverse down into the ending diagonal - though this is not a requirement - it is, however, common so we shouldn't we surprised to see it. In fact, on the futures, we saw this overshoot which so far has indeed reversed back inside the lower side of the upper trendline. While we could have another drop and minor new high again testing this upper trendline - this is not a requirement. Confirmation of trend change comes with break of the lower trendline of the ending diagonal - and even better - a break of what I have labeled as the wave iv of the ending diagonal. When we break these watch out below...as the low 3100's and then the psychological 3000 levels are key areas.
5) On the daily and intraday timeframes (not shown here) we are seeing bearish divergence on the waves of the ending diagonal and between the high of the diagonal and the June 8th high - on indicators like momentum or RSI.
6) VIX did not drop down further on the SPX rally late in the day today - a bearish divergence.
7) Put-to-Call ratios are at extreme levels comparable to March and Sep 2000 - and more extreme than the Feb highs. Notably, we see the ratio rising last few days as SPX has been making newer highs - again - not confirming the rally - something that is a hallmark of wave 5s and ending diagonals - as reversal ending patterns.
8) Breadth indicators are showing negative divergence. As a matter of fact, more stocks dropped today than rose. The SPX was carried higher by fewer and fewer high cap tech names - especially the likes of Amazon. When the Generals lead the charge up the hill but the troops refuse to follow - watch out :)
9) I have shown the early Feb Gap and late 2019 (broken support turned resistance) resistance levels in ellipses. This is roughly around the same 88.6% Fibonacci retracement level I mentioned above as well as the upper bound of the ending diagonal. All in all - a confluence of quite a few interesting areas.
10) S&P Equal weighted CAP is not confirming the rise in the regular SPX - again indicating that few big cap tech names are distorting the SPX. The Russel 2000 and other small-cap indices - plus the Dow - already made their highs on June 8th. Their refusal to go to new highs is a bearish sign for the SPX also.
If SPX is indeed going to turn it needs to turn soon or we will need to re-evaluate the counts. There is no doubt the medium-term is bearish - the question is if the time is now or all-time highs are first needed.
We are at a key area now.
Could Tuesday become turnaround Tuesday again?
Cheers!
Cyrus
I have never in my time trading been as challenged as have been since May. While I played the down wave from Feb highs to March lows easily and played the rally from close to the lows to early May (as I counted 5-waves up from the lows) - I must admit the rise since then has certainly caught me by surprise and most pros as a matter of fact.
I trade for my own account and having the market go against you is certainly no fun as many of you know. I only post here what I am doing myself with my own money. I neither have a service to advertise nor do it for ego. I love this posting aspect of TradingView.com because it betters my own trading and forces discipline on me so I can go back and review what went right and wrong.
Markets lately have certainly humbled me though in the long span of 10+ years I have been trading I can't complain - having had far more wins than losses.
Having said that let's get to the heart of the current trade - the short SPX trade which I am in now.
There is no doubt what I have labeled as wave B has retraced the Feb-Mar crash to a very deep level and threatening now to reach all-time highs. While a Flat can have a wave B higher than the origin of wave A I still believe we won't make it to new all-time highs at least in the SPX.
There are of course no guarantees in trading, but the risk-reward I believe still favors heavily the shorts.
Several things to note on these charts :
1) On the left is the SPX showing how deep the SPX from April to August / Sep 2000 retraced almost an exact Fibonacci 88.6% (square root of commonly use 78.6% level) the drop from March 24 to April 20, 2000 - the initial wave down of the dot-com crash. I am seeing more and more lately this 88.6% level - a level which most Fibonacci indicators don't automatically include but which I highly recommend you include. You will be surprised how often the 78.6% is exceeded in waves 2 or B but end up reversing at the 88.6%.
2) On the right is the SPX now and as can see today we hit almost exactly the same 88.6% Fibonacci retracement of the Feb to March lows.
3) Further - we can see an ending diagonal forming since June 15th lows and today we hit and reversed exactly at the upper trendline of this ending diagonal.
4) Ending diagonals can be complicated creatures and go on and on with multiple sub-waves - usually confounding Elliotwave counts - but we can see 5 overlapping waves up each composed of 3 subwaves - as required by Elliot rules. It is common for the final third subwave of wave 5 to "overshoot" the upper trendline and quickly reverse down into the ending diagonal - though this is not a requirement - it is, however, common so we shouldn't we surprised to see it. In fact, on the futures, we saw this overshoot which so far has indeed reversed back inside the lower side of the upper trendline. While we could have another drop and minor new high again testing this upper trendline - this is not a requirement. Confirmation of trend change comes with break of the lower trendline of the ending diagonal - and even better - a break of what I have labeled as the wave iv of the ending diagonal. When we break these watch out below...as the low 3100's and then the psychological 3000 levels are key areas.
5) On the daily and intraday timeframes (not shown here) we are seeing bearish divergence on the waves of the ending diagonal and between the high of the diagonal and the June 8th high - on indicators like momentum or RSI.
6) VIX did not drop down further on the SPX rally late in the day today - a bearish divergence.
7) Put-to-Call ratios are at extreme levels comparable to March and Sep 2000 - and more extreme than the Feb highs. Notably, we see the ratio rising last few days as SPX has been making newer highs - again - not confirming the rally - something that is a hallmark of wave 5s and ending diagonals - as reversal ending patterns.
8) Breadth indicators are showing negative divergence. As a matter of fact, more stocks dropped today than rose. The SPX was carried higher by fewer and fewer high cap tech names - especially the likes of Amazon. When the Generals lead the charge up the hill but the troops refuse to follow - watch out :)
9) I have shown the early Feb Gap and late 2019 (broken support turned resistance) resistance levels in ellipses. This is roughly around the same 88.6% Fibonacci retracement level I mentioned above as well as the upper bound of the ending diagonal. All in all - a confluence of quite a few interesting areas.
10) S&P Equal weighted CAP is not confirming the rise in the regular SPX - again indicating that few big cap tech names are distorting the SPX. The Russel 2000 and other small-cap indices - plus the Dow - already made their highs on June 8th. Their refusal to go to new highs is a bearish sign for the SPX also.
If SPX is indeed going to turn it needs to turn soon or we will need to re-evaluate the counts. There is no doubt the medium-term is bearish - the question is if the time is now or all-time highs are first needed.
We are at a key area now.
Could Tuesday become turnaround Tuesday again?
Cheers!
Cyrus