Hope your weekend was a good one. The markets provided a mixed bag of
performance by day’s end on Friday. So let’s look at what we can expect
this week.
Weakness continues in the S&P 500 (SPY), with what looks like a basic ABC correction completing at Friday’s lowest levels.
Wave C and wave A are equal in size, and the decline has many of the same traits (accelerated lower in the Thursday session to bottom out on Friday).
Call us cynical, but its rare that we trust standard looking set-ups. Sometimes they work and sometimes they don’t, but we think we have a much greater edge when the downtrend stops and the majority of traders have given up on the standard set-up. We’d estimate that probabilities change from 50-50 on a standard set-up to more like 75-25 when you can trade when others give up.
Also, the up gap last Monday 14th had some logic behind it. We’d say ‘the world didn’t end the set-up’ this is where traders dump equities into Friday’s close on fears (in this case it was the US and North Korea), only to buy them back on Monday when the fear has disipated.
We don’t see that set-up this week.
We are looking for a move to below last week’s lows to 2,411-16 before we try new long positions. The correction in March this year was 79 points so we are looking for a move more or less equal to this for a possible fourth wave. Actually the declines last week and March look quite similar and both had a similar down move on the Monday to complete the correction.
We wouldn’t post really bearish options until they have higher probabilities of being sustained and profitable. Even if there is a big selloff, we can catch some short opportunities on the retracement as there will be an even bigger decline setting up later.
Weakness continues in the S&P 500 (SPY), with what looks like a basic ABC correction completing at Friday’s lowest levels.
Wave C and wave A are equal in size, and the decline has many of the same traits (accelerated lower in the Thursday session to bottom out on Friday).
Call us cynical, but its rare that we trust standard looking set-ups. Sometimes they work and sometimes they don’t, but we think we have a much greater edge when the downtrend stops and the majority of traders have given up on the standard set-up. We’d estimate that probabilities change from 50-50 on a standard set-up to more like 75-25 when you can trade when others give up.
Also, the up gap last Monday 14th had some logic behind it. We’d say ‘the world didn’t end the set-up’ this is where traders dump equities into Friday’s close on fears (in this case it was the US and North Korea), only to buy them back on Monday when the fear has disipated.
We don’t see that set-up this week.
We are looking for a move to below last week’s lows to 2,411-16 before we try new long positions. The correction in March this year was 79 points so we are looking for a move more or less equal to this for a possible fourth wave. Actually the declines last week and March look quite similar and both had a similar down move on the Monday to complete the correction.
We wouldn’t post really bearish options until they have higher probabilities of being sustained and profitable. Even if there is a big selloff, we can catch some short opportunities on the retracement as there will be an even bigger decline setting up later.
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