Retracement Particulars

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This is obviously a holiday weekend (not as exciting as Juneteenth, but a federal holiday nonetheless), and frankly I don’t have a heck of a lot to say. So I’m just going to do a handful of posts and try to make them good ones. So this is for Saturday…………..

The good news is that things are playing out perfectly. My charts were correct (some monkeying around with anchor points here and there, but on the whole, on the money). The bad news is that my pigheadedness, which more than a few of you have noticed, kept me committed to my puts way too long.

The only thing I did SOMEWHAT right during the week was move 40%+ of my portfolio into cash, which at least didn’t spend its time getting punched repeatedly in the face like my poor puts did! The OTHER not-totally-stupid thing I did was, as always, be in puts that have months of time left on them (average 147 days now; literally nothing before mid-September!).

What I’ve done is taken a good hard look at the three important stock futures and verified that my Fibonacci retracements on all of them are identical. In other words, I don’t want to “curve-fit” these Fibs to reach a certain outcome. Instead, all of them have this in common:

  1. The low anchor is set to the Covid crash low (March 2020);
  2. The high anchor is set to whatever the lifetime high was (either November 2021 or January 2022)

We’ll start with the biggest of them all, the S&P 500 500 futures, which /ES. The topping pattern is as plain as day, and seriously my jaw is on the floor reading about how EVERYONE is convinced we are in for a totally new bull market now. It’s riotous.

Zooming in, we can see the exact level of the retracement is 4244, about 1.8% higher than Friday’s close.

The /NQ NASDAQ has a very similar pattern, and it suggests we’re very close to the retracement level.

Here we see the tinted space between Friday’s close and the retracement level is about 1.3%. Now I want to emphasize that nowhere in the Bible does it state the price hits these lines to the penny and then goes into a free-fall. They are guidelines. Approximations. Vicinities. Yeah, sometimes they “nail it”, but don’t have a heart attack if we go above these levels or, better yet, don’t even reach them.

Lastly, the Russell 2000 /RTY is basically “done” already.

Indeed, to my point about not having a heart attack, the /RTY actually went a tiny bit over its retracement level.

The ideal scenario, of course, would be for these levels to be respected on Sunday, Monday, and Tuesday, with some weakness kicking in sometime during those days. As with all things regarding the market, only time will tell.

One last item that’s intriguing is the bond futures (/ZB). Take note of the trendline failures and how, even with a modest rally last week, the prices stayed perfectly below the failed trendline.

We zoom in for a closer look……….

……and closer still:

In summary:

  1. I had a rotten, rotten week (still handsomely profitable for the year, but boy, did I get skinned);
  2. I’m in 43% cash since my confidence/desire for risk were blown to smithereens;
  3. These Fibonacci levels , “discovered” long before this rally even took place, have done an amazing job thus far, and I sure would appreciate it if the market gods would keep them as respected.