Wednesday Surprise

Had a rough night again and just woke up – for some reason the stress of the past few months seems to start interfering with my sleeping pattern.

Anyway, we are nearing the point where we either get a reversal followed by a sell off (Blue) – or we continue higher and yesterday’s low was the bottom of B of (Z) of {2}.

Breadth on the SPX is 10:1 positive, which is quite bullish but not unheard of for a temporary snap back ahead of a reversal. It’s a tough call right here – if you go bearish do it with play money you can afford to lose – it’s an FMOC day and who knows what might happen in the afternoon.

Similarly the Dollar appears to be completing a nice zigzag consolidation which should now be followed by more upside. This is really the chart to watch: If we continue to drop much beyond 78.6 then I would start getting a bit concerned and consider that something else is going on.

11:17am EDT: Black Swan baby!! Hat tip to Tyler at ZH:

Short term markets mean nothing — Nassim Taleb

Exactly.

12:26pm EDT: I’m not liking this tape a bit – we seem to be consolidating sideways here – be very careful.

The Dollar has plunged to what I think should be the maximum for this zigzag – we are already at the 161.8% fib line in relation to wave A. Something doesn’t smell right – I would like to again caution everyone to keep your bearish exposure light and to only play with money you can afford to lose. It’s FOMC day and thus I decided to remain in cash for now.

2:40pm EDT: I actually grabbed some SPY 89 butterflies right around the top. Thinking was that we either bust higher or drop at least to 89 – thus it’s a lottery ticket and there’s little risk.

We are now at ES VWAP (1001.5) – NQ VWAP (1616.5) has already been breached. It’s going in the right direction – I like it.

3:00pm EDT: Soylent Orange it is then. Wow – that was executed masterfully – amazing. Glad I didn’t buy puts – that’s the beauty of using a butterfly: if you’re wrong the pain is very limited.