853 Please!

UPDATE 10:11am EST: Booo-yaaah!!!

We’re getting closer to 853 – at which point I’ll be grabbing a boat load of Feb/March SPY puts. Gold still not following equities – so far so good but it stubbornly clings above the 900 line.

UPDATE 12:34pm EST: So, I’m already sitting on those Feb puts but am hedged right now – so no cookies just yet. I suspect we might get a late day rally, especially after looking at the NDX:

As you probably noticed, the NDX is leading this advance and today stopped but a few ticks below the Jan 28 high. Now, EWT rules only state that we should not breach the high of the higher degree wave – in this case 2 of (5). However, we should also consider that the Jan 28 high might have been only wave A of 2 of (5) and that we bust higher to reach A-C equality. That would get us fairly close to what we are now considering the top of intermediate wave (4) and this is our line in the sand.

So, it’s worthwhile watching the NDX in the next two days as it’s the leading index and since its wave pattern seems more developed. It’s possible to have discrepancies between indexes in the wave count but I don’t think we’ll see something completely different play out in the SPX/DJI than in the NDX. Finally, a 2 day close below the 8000 DJI should be a ‘tell’ that we’re on our way to the downside.

I’m sitting here now hoping for a rally as I didn’t think we’d drop so quickly from the top – but that’s exactly how things often play out. Had it not been so early in the day I would have remained unhedged but I do believe this move down could be just another shake out and an opportunity for the bulls to reload. We’ll see – the Yen is pushing up pretty hard right now and maybe I missed the golden spot. Then I will have to scale out of the short side of my puts at the next best opportunity, which is always a rip, not a dip.