Getting Punchy


The DX falling wedge is even better defined.  Will it finally break out today, with an equities sell-off?  Or, will it fail again and we get our bump up to 1411?  Or, will it be another endless day of a mind-numbing, low-volume test-pattern of a market?

The megaphone on the 15-minute chart looks tired.  We completed the Bat Pattern at the .886 Fib of 1404.64 on Tuesday, tagged one of our two Fan Lines from 2007 on Wednesday, and have gone nowhere since then.

As I wrote last night, VIX looks ready to pop a bit.  Breaking the megaphone’s lower bound on SPX would be a great start.


UPDATE:  10:50 AM

The megaphone broke, and a little channel is forming on the back test.  In a market like this, I’m not going to assume the back test will lead to immediately lower prices.

I remain short from 1399, but there’s still a (diminishing) chance we’ll run up and tag that Fan Line at 1411 before starting down.

VIX’s falling wedge is looking very pregnant.  Note what happened the last time one of these broke out.

This latest harmonic pattern saw a reversal at the .786 of 16.64 — which suggests a possible Butterfly Pattern after the break out (the 1.272 is at 13.94.)  Maybe something like this:

More later, if something — anything! — happens.


Getting Punchy — 16 Comments

  1. PW a couple of questions. First if the NDX is a gartley pattern the it could complete here or at 2755.27 (.886 of XA 2795.35 – 2443.92). Maybe I am off in my labeling but what are your thoughts? Second, the RUT does not appear to be a harmonic pattern or am I looking at it wrong? Thanks for your insights.

    • check out last night’s post on NDX.  RUT came within 2 pts of the .786 (808.59) of the Jul 5 to Jul 21 drop — the smaller of the two patterns.  The larger might not complete in this cycle.  Will post later this morning.

  2. By a simple Technical Analisys you may perceive that “The Train is About To Leave the Station”!

  3. PW – A nice little crab pattern setting up that looks like it will finish Monday/Tuesday at 1412 … Use the SPX 5 min and X as Thursday high of 1406, and A as this mornings low of 1395 …

    • Yes, thanks, I’ve noticed that, too.  The action at the close is encouraging.  Just have to get through the weekend without any major hiccups.

      • hey PW – that’s good to hear. great post on the VIX the other day too – with it breaking the Fib support Friday, do you think this might be the swoosh down to 13.66 for which you were looking (to coincide with a potential market top)?  as in, a decline of ~8% more with only another ~0.4% move on the S&P (1411), thus giving us even more potential downside below?  (the frequently imagined super spike in VIX setup ala 2008/10) or is the drop to 14.74 just noise and still looking for maybe a 4% dip, a rise into elections, then re-evaluate?      

  4. I got a tad aggressive with some weekly puts that I bought Monday. Amazed how the market essentially did nothing on the entire week.

    Licking my wounds, and my /ES position, being theta free, will provide the healing soon.

    • Yeah, I suspect you’ve got a lot of company with those puts.  We went wine-tasting over the weekend and were tempted to extend the trip into the week — but I thought there’d be some action.  Oh, well…

      Lots of economic news next week: retail sales, CPI/PPI, initial claims, permits, starts, Philly Fed, consumer sentiment and leading indicators.  And, maybe Europe will come back from holiday.

  5. These last few days have actually really inclined me to believe we are in for a big move (to the downside) soon. Looks like they are trying to time decay options/balance their book as much as possible before OPEX next week. My guess is there were a ton of equity puts written last week before the jobs report that they are trying to scare out. For anyone that doesn’t believe the market is manipulated I always point them to the week or so before OPEX. Great work, as always, PW. You’ve saved this old bear a ton of money

    • I think you’re exactly right.  That turnaround on Friday (rather than traversing the channel as was the pattern) really creamed a lot of put buyers. 

      I equate OPEX with a carnival midway.   It always looks so easy, but the game is rigged six ways to Sunday.   We’ve been lucky so far.

      I’m very glad to hear the site is helping.  As a fellow bear, I’m working hard to tune out the noise and call ’em as I see ’em.  I appreciate your support.

      •  PW, it can be painful to be bearish these days.  Since 2009, the market is not normal anymore.  Consider good news means good news to the market.  Bad news means even better news to the market.   It drives people (who are bearish) crazy when the skill and logic might not apply.   (Consider the headline “Euro reaches a 3 month high against US dollar, as the unemployment in Euro zone hits a record.”) It seems to tell me that Euro zone is in deep trouble but Euro should go even higher.  This is against logic. 

  6. There have been some HUGE 1-min candles in SPY and various stocks.  Somebody wants OUT of their big positions when they have the chance to distribute, IMHO.

    Glad you liked the chart from last night.  Very interesting.  Likely headed out to the golf course soon…no reason to watch the paint dry.  Have a great weekend PW.