Sunday, October 21, 2012

Charts 10-19: the case for 1486

Nice to see that the market is keeping us guessing here.  So we're still in wave 4?  Or, have we topped, and we'll look at this in a week and say we "failed" a wave up here somehow?

At least it was satisfying to see those SPY calls I had sold early last Monday, leaving money on the table, it was good to see them go to zero.  Any time you can trade in and out of a short-term option, make some money, and watch it wither and die, well, that always feels good.

So I'll make the case here for 1486.

Take a look back at the first week of June, 2012.  There, from the low @1266, we put in a spike low, held, and rallied very strongly, within a few days of the bottom.  The same candle pattern here could take us 60 points north from 1426 tomorrow by mid-session Thursday.  Wednesday would be the key, a mix of real-estate data and FOMC fuck-all, who-knows, for a gap-and-go monster rally day.  It would be a repeat of W1 up to a point, where we would hit resistance mid-channel and finally top.

That could be Thursday, with Durables and some other data, where the market rallies early and then rethinks the numbers, reversing hard and nasty, heading down to 1400 by the first days of November.  Stopping at 1486 SPX would make wave 5 here about .618 the length of the 97 pt wave 1 from earliest June.  Tomorrow would dip early and reverse.

The VIX breakout is concerning and needs to be watched carefully.

10-19 SPX, drop to 1426 Monday?
Repeat of early June gives us the spike high top
VIX breaking out?  or just a tease?

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