Good morning, everyone, from pitch-black Palo Alto. It’s been quite the week, and I’ve got to say two adjacent things right at the top: (a) the market has been amazingly chart-friendly (b) shame on me for missing some of that chart-friendliness in real time. (Although I’ll add (c) NOT shame on me for actually anticipating some of this stuff in advance, even though I myself ignored it!)
Look at what’s going on with the /ES futures. Tuesday, of course, was our amazing CPI tumble. Wednesday and the first portion of Thursday were the “grinding away” period, clinging tightly to the trendline. Yesterday (and here’s the part I’m upset with myself about) the market fell hard, went roaring higher, and did a PERFECT touch of the aforementioned “clinging” trendline (blue arrow) at which time it did a miniature version of the Tuesday plunge. Since then, we’ve been leaking lower.
Backing up, you can see the analog that I pointed out about a week ago. It panned out beautifully, including the fact that the pain-in-the-ass areas circled in blue pushed SOMEWHAT into the circled-in-red areas. But an analog is an analog, and it was spot-on. The key item below, quite obviously, is that looming Fibonacci retracement for MAJOR support. It’s going to take some extraordinary exogenous event to get us through it and, afterward, to my oft-cited goal of 3500 as the low for the year.
The same kind of pattern is playing out with the NASDAQ futures. In this instance, the next challenge is the mid-June low. If we can break that, people are going to be pooping their Pampers.
The murkiest chart is the /RTY small cap futures. I’ve simply pointed out a recent low with an arrow that we need to cut through before getting to the murky muck of activity that happened in the second half of June.
I’m pretty damned short right now, with 34 bearish positions. I have left shameful amounts of money on the table, not because I got light, but because I’ve been very conservative (with respect to how far out in time the expiration is for my options). My most head-hanging failure is the abandonment of my IYR position, which is up 200% from where I dumped it and, I am very confident, will simply keep ascending in value. The reason I keep mentioning IYR is that I know plenty of you, unlike me, had the balls to stick with it, and I am cheering you on, since it was always a great idea.
