With ES 751.25 being broken today (today's low was 750.25), that was our signal that this minor wave 4 is over. Since our larger wave 3 has yet to accelerate to the downside, I would expect our wave 5 of this wave 3 would do the job. If it doesn't, then it will occur in the larger wave 5.
My best guess for tomorrow would be a gap down without a fill. However, if we don't, then we'll likely subdivide this wave too. Look for rallies to die at 770 or below. Any strength should be erased in the first 90 minutes of trading the US session. The bulls best case scenario is that we just put in a flat b wave, and we're going to make one more attempt at 780. I'm not saying that it would happen, only that it is possible.
This wave 3 should touch or break the bottom trendline, see the 60 min chart, (the actual value is below my chart, sorry), but I would venture a guess in the 600-650 range.
Posts
Rich, I see a lot of targets bandied around for the end of this 5 of 3 of 5. Most are trying to connect it to the 1 of 3 of 5. Some numbers I see are 738, 710, and 690 (all approximations of course).
ReplyDeleteHow do you decide when to take profits in a case like this? I suspect we'll end this 5 of 3 of 5 in a semi-capitulation day that should be easy to identify, but more ideas would be helpful.
Current position: holding massive position of March 760 puts from average of 768 SPX.
gautsid,
ReplyDeleteEssentially, my profit taking plan is when we have had a massive selling event, then I will begin to take profits at the close of that day. I would define a massive selling event as at least 10%+ selling over the course of no more than 2 days. Likely, our final w5 will just be a retest of the lows, so I want to be out of most of my puts at the end of the massive selling. I would suspect that it would be at least 650 if not lower.
Just like you said, we gapped down. Nice call Rich!
ReplyDeleteRich
ReplyDeleteDo you think there will be another opportunity to load up short or have we missed the boat? I guess the question is do we gap down straight at the open on Monday or do we fill the gap?
Mike
Mike,
ReplyDeleteThe bulls have been buying the dips the whole way down. There have only been a few instances where they never were able to fill the gap and the market tanked on those days. We are certainly due for one of those days. Will it be Monday? My best guess is the gap doesn't get filled.
Best of luck. I've been holding my puts for almost 4 weeks now (Mar expiration), and I'm glad I don't have to make that decision ;-).