Folks, sorry about the color scheme in some of my charts. I am partially colorblind in one eye (have trouble seeing green … no pun intended) so that is why my bars are white or black. Anyway, I'd like to discuss my trader psychology of the moment. At the end of a fairly successful week, I find myself in cash because of my indecision on what's next. It feels like we are at a crossroads here. We've been offered another chance to decide between the red pill and the blue pill (for those unfamiliar with the Matrix reference, red pill = reality, blue pill = la-la land).
So far, my /DX EW counts have been agreeing fairly well with the recent bottoming action in /DX implying further downside in equities and (some) commodities. /DX has broken an ending diagonal triangle and seems to be breaking an 8-month (red) channel … and it has done this with volume. I have been waiting months for this and this recent action in the USD supports the case for markets taking the red pill and coming back down to reality (albeit possibly slowly).
Being short equities, short (some) commodities, and long the USD is a contrary position to the superfluous bullishness of the past 8 months. However, the contrarian to my contrarian is screaming at me … telling me the powers that be will keep knocking the red pill out of our hands everytime we try and take it and will force feed us the blue pill again. This is what I think more blue pill action may look like in SPX.
I went fractal hunting for a down-up-down pattern that ended up being a local minimum (hilighted in the dark gray). Something from mid-May caught my attention; a similar down-up-down pattern. If this May/June fractal repeats itself, we could end up seeing a head-and-shoulders-oid topping formation. Anyway, just my 2 cents … I'm hoping we take the red pill but it could go either way so I'm staying nimble.