The Facts Of Life
You take the good you take the bad you take them both and there you have the facts of life.
And tonight’s fact of life is that the short term bearish scenario (i.e Soylent Green) is most likely dead as a door knob and only a miracle in the form of emergency CPR (i.e. an immediate drop) would bring it back to life.
What’s also crucial to observe is that the wave pattern starting at the July 3rd low looks like a typical extending third – I don’t see an a-b-c pattern here even if I squint my eyes and roll my chair to the other side of my evil trading cave.
So, to much of my chagrin I will have to accept defeat and go back into cash once we push beyond the 1040 mark. It’s not worth riding this up as this could turn into one long third. The chart only shows an idealized projection of the blue scenario and a third wave could easily get us to the 150% fib mark, which would be the SPX around 1063. That’s a lot of potential damage and hedging is tough as most of the action and tape pre-painting happens overnight these days – the futures are already pushing straight up as I am typing this.
Now, I know what you are thinking: We’ve had several failed starts by now – how long can they keep this shit up? Frankly – I have no idea, it seems that extremely oversold conditions are quickly recovered and retracements remain dip buying opportunities for the bulltards. This reminds me of an old rule I learned during my trend trading times: Trends have a tendency to persist and a breach of a trend has to be proven before it’s safe to switch sides.
Am I changing my tune? Absolutely not – I will keep re-loading short positions on every wave cycle to the upside. My next stop is the 1070 mark and if that doesn’t hold 1100. At some point we’ll reach that tipping point and I continue to believe that we’re pretty close.
Am I getting frustrated after a six month merciless rally? You better fucking believe it – but the meek shan’t inherit the earth and there are no tears in football, full contact knitting, or trading. You learn from your defeats (as much as that’s possible) and you move forward. I know this might be of little consolation now, but keep in mind that old aphorism:
The higher they fly, the harder they fall.
Until we get to our next bus stop (i.e. 1070 – 1100) it’s back to scalping and intra-day trading again. We got to trade the market that we get, not the market we want to have.
Meanwhile, in the real world (NYC):
Hat tip to Jeff over at the Housing Time Bomb. Both of us wonder when reality will finally catch up with Wall Street.