I had a friend come into town yesterday that I have not seen in years, so I am going to go ahead and publish tonight’s post now, and potentially do some editing real time if need be, so I can jet outta here at the close. There is not much to say here. We’re up, the financial markets survived another day… Markets are near term overbought (intraday) and at resistance levels. The stage is set for a big move tomorrow.
Like Mole said yesterday, the market completely crashed. We know there are a few things we should expect after a move like that. One is a “volatility crush,” which the $VIX is gladly giving any poor sap that trades options. Another is a bounce, and we have got a nice bounce today.
The two same options remain on the table. The odds are fairly split, and gobs of evidence can point to either solution. However, rally or no rally, we maintain that the larger trend remains down.
I also want to encourage everyone to step back and play the charts. Yes, there is looming news, but I can’t trade based on the reactions that I can’t predict about news that I may or may not know is coming. I would much rather grab things at support or resistance, and take small positions due to the massive IV here.
Looking at the ripples, I can make a very strong case for a complete or almost complete wave 4, meaning we should get another decline very soon. I wouldn’t be surprised to see us move down tomorrow morning and bounce back up after the vote. The chart below shows the $SPX on a 10day 10 minute timeframe. If this timeframe is not what you trade, simply understand that the market is setting the stage for a decline rather than a rally on this scale.
And here is the $SPX on a daily timeframe…
And as annoying as it is, we need rallies like this so we can continue to play down our favorite stocks. As Mole said, no matter how many 300 point rallies we get, the trend is still down. We might have a week or two of pain in front of us, but the resolution will ultimately be lower prices.
As it stands right now, the markets have retraced between 38.2% and 50% of yesterday’s delcine. These are typical targets for a retracement. Things that were down huge yesterday, and up huge today make easy targets for those willing to take some risk right here. You guys know me, I can’t help but grab puts on Tech, and after yesterday, maybe you understand why I have that urge. 9% drop in an index is one day is a pretty big move. In case you forgot, a list I am keeping my eye on includes BIDU, GOOG, FSLR, MA, CF, CME, ISRG, CCJ, AAPL, OI, and a few more.
As Mole likes to say…”No balls, no babies!” But make sure your risk is managed, we don’t need anyone castrated… Finally, I will leave you with a beautiful illustration of our financial debacle, as illustrated by Mark Slavonia as displayed by tech crunch. I want to see US Congress vs. Queen of England… or WFC vs. the Federal Reserve…