My apologies for being absent for some time. I had some family business to take care of, and I'm glad that I'm back!
SPY Gartley Pattern
Here is my market view of SPY. We had a reversal candle on Friday, and I'm expecting a follow through on Monday (as we all know almost every single Monday is a big UP day).
Here is one of the price patterns coming to my mind. Of course, we don't know how high the first leg will go up, so the price projection needs to be adjusted accordingly. This pattern may or may not be working, as it's still too early to tell, but I will be watching this pattern very closely.
If you missed catching a falling knife on Friday, you still have a chance to make money in both directions, so let's wait for the right entry point.
(On a side note, I'm pretty sure that people who go long at the end of Friday and short on Wed every week would have made a pretty good money on the indices, as every Monday is a big up day and every Thursday is a big down day!!).
Going Long (Bull PUT Spread)
If Monday gaps open big, it may be too late to go long – but by all means, here is one of the examples of a bull put spread – SPY 106/107 (buy 107 put and sell 106 put) credit spread. This type of spread becomes very effective ESPECIALLY in the last 2 weeks from OPX (Option Expiration) as you could take advantage of the time decay. If you could pick the right direction, you could double your money without a big price move AS LONG AS the underlying stock stays above/below the short strike price.
In this example, as long as SPY stays above 107, you could double your money in two weeks.
Going Short (Bear CALL Spread)
After SPY hits the first target of 109.83 (gap from Feb 3), you could take a short entry. I'm expecting some kind of peak on Feb 16 (Feb 15 is a holiday), which is Tuesday on OPX. You could either short it via March put option or Feb bear call spread. If you are taking a bear call spread, please remember that you only have 4 days to make it work, so use a very tight stop (right above the gap fill). If you could pick the right direction, you could literally double your money in 4 days!
Here is an example of 110/111 bear call spread (buy 111 call and sell 110 call options). My expectation is for SPY to expire right around 108 in Feb OPX.
Combining them together (Iron Condor)
If you are sure that SPY will expire somewhere between 107 and 110 for Feb OPX, you could hold on and combine these two spreads together to maximize the profits. Your entire risk would be $100 whereas the max profits would be $900 (you need to put them on at a different time. The results would be different if you put them on all at once).
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Using Pivots
I have discussed using pivot points for good entry/exit points previously, and even if you have absolutely no idea which way the market is going, Friday's support was well expected and supported by both weekly and monthly S2 pivots.
Another price pattern coming to my mind at this point is IH&S, which would result in a double top and potentially forming M pattern afterwards. Either Gartley or IH&S patterns, I believe the major indices are currently going through the correction period against the major move up from March 08 low, and there will be one more leg up after this correction is over. This is even more clear if you take a look at a monthly chart.
SPX Monthly Chart
Here is an update of the SPX monthly chart As you can see, monthly candle is a single leg up (no lower high candle) up until Jan 10 and this is the first (possible) lower high candle since March 09.
EUR/USD Thee Drives Pattern
Here is the EUR/USD update. This pair has completed a=c pattern at 1.3654 and ready to bounce. I see a possible three drives pattern formation on this pair.
Happy Superbowl Sunday everybody!
