We are on for a new high on SPX

Well what a day - never in a million years did I expect such a move but it goes to show how one sided analysis can be. As you know I have been focusing all last week on the upper range of 1074 and counted out any possibilities for what we just did.

(Below chart is in ES)

W1 1026 towards 1058 = 32 points

W3 1039 towards 1092 = 53 points OR 1.66% of the primary wave. It does not get more perfect then that in terms of ratios as this number would represent a perfect W3 target. I am quite mad at myself for not having seen this as we moved towards 1039 with a possible W2 completing and W3 starting. I was so focused on this being an ABC correction move off the highs that was proven quite wrong today.

So what does that mean for us? We completed W3 today and are going to see ourselves in a W4 formation that is just some general whipsaw in a tight range. Minimum targets of course the 23% levels but its possibly and to be honest more likely to see a move towards the 1069 range - a range you remember being key in last weeks trading. This would be a great spot to unload some shorts or enter hedges by turning puts into spreads to minimize risk.

After completion of wave 4 we have a few targets on the upper side - per proper ratios its anywhere from 1116 towards 1131 as the max - however we have the problem of the DOW - DOW is almost at the target of 10300 - which will make the run for SPX towards those upper ranges very difficult. So we have to assume that we may get a failed W5 attempt with only a marginal new high as I had mentioned previously.

Yes - I know I did not want to talk positions but this is a good example of managing around a position. As you know put holders got killed today - on price and premium. As you can see I entered 2 additional positions today for my spy dec put - why did I choose this size? My original position was priced at 3.00 and I now lowered my average to the open price today - meaning, assuming that VIX will remain unchanged if we reach yesterdays open again which also represents the minimum target of W4 I have a chance to get out of this position without any losses or if I want to keep the position (and I do want to keep it) trade out a bit or convert the put into a spread to bank some of the premium if we do end up moving higher. But as we all know - this market has shown us over and over again that plans do not like to work out the way we always want to.

Not what I expected

Well what an overnight session - definitly not what I expected and I added 2 more loosers to my positions. I know I said I will not justfy trades and hope I am not sounding like I am making an excuse here - but as you can see last night presented a low risk short trade with a tight stop that could have played out. Well it did not - and I stopped out with minimal damage. Looking back at the last few months - this would have definitly been a trade I would have kept running without much of a stop as I "believed" we would see lower prices.

Now last night I was confident of lower prices towards the open and that definitly did not play out. I made the mistake of being too focused on what I considered a pull back for today - that I did not even put much emphasis on a 11 point gap higher before cash open. This confidence of course was coupled with having hit our short targets we had outlined last week but no clear plan of what would happen if we do break those levels.

So from here - after having broken an important FIB level (the 61.8%) our next target is the 76% level at SPY 108.30 or ES 1078.

Now the case towards 1016SPX I was expecting is being questioned quite a bit - from a pure charting perspective - we should see a new high - DOW 10300 is just around the corner and this move here could be setting up for a run there. Also keep in mind that the DOW is currently outperforming SPX so we could be making a new high on the DOW while we create a double top or marginal new high on SPX.

Either way - I am going to have to go back to the drawing board now to figure out our next trades. The chances of the open today being the high of the week - lets be honest - very low probabilities so we have to figure out how we can make some good trades this week.

Looking for 1071-1073 prices during overnight session

Will initiate shorts around those levels. We are at quite an important turning point here at the moment - while every day is important in the markets - I think the next few days may give us some clues on the longer term direction - I will post up some more details tomorrow.

Will let you know if I take any positions tonight via futures ...

Interesting Pattern

I know I had mentioned I am not always going to justify each trade but this one was too important to pass up. I am going to restate some stuff again (sorry but I need to make this point).

"The largest pull back during our incredible rally was back in june/July for a total of 87 SPX points. Our current pullback comes in at a total of 68 with a low of 1033. You all remember the significance I had mentioned for our 38% retracement level at 1016 SPX - if we do see a sell off towards this level we will be adding a total of 17 points for a grand total of .... wait for it ... wait for it ... yes 85 points pull back - which happens to the same size pull back we have had back in June/July."

Additionally we have been talking about the same short entries all week now.

"Short setups 1061-1062 with stop at 1064.50. If that fails short again at 1068 with stop at 1073."

Both of those targets worked out pretty well in terms of price and stopping at that range for resistance (at least short term). Now I had also added my second range in case the first fails which was very close to the previous resistance. Thus far we have not violated this last range and it is my feel we will not violate at least on the short term. I will be looking for another possible short entry via ES on Sunday night so I will keep you all updated. For now I am quite happy with my few puts (feels so weird only having 10 contracts). Well either way here is some amazing comparisons.

This is a comparison between July this year and now. I have circled the important areas.

Green Circle - we are making a higher low

Blue Circle - we breach the previous swing high by a marginal amount making everyone believe the higher low from green circle is an indication for going back to retest the upper ranges and possibly make a new high

White box - whipsaw heaven with big wide ranges but close prices of the previous days close to one another (though for us a lot happened pre-market today)

Additionally both hit the perfect target of the 61.80% retracement. From here it would be a perfect place to revisit the 1016 SPX range which was just a few points away the last time. This would almost play out exactly as before if we are indeed seeing this type of move.

Waiting for Jobs Data

Well nothing more to say. We did breach 1064.50 during the overnight hours as expected with the close this high. However the market is waiting now for important news.

As described in the comments yesterday - the 10% number may already be priced in as we had been talking about it for many months now. So its up to the market to decide what to do. We did recover the losses from Friday last week - so the market can make a decision here on what to do.

So looking back at the ranges from sunday:

"Short setups 1061-1062 with stop at 1064.50. If that fails short again at 1068 with stop at 1073."

It seems neither one of them will provide a safe short entry. High at the moment us 1066.50 just a few points away - if we do reach the 1068-1073 range I would be heistant to enter a swing position with a minimum of 25 pts spx gains. So as a result I may use this for a scalp but nothing more. Lets see how the market reacts.

Will post updates before cash hours to figure out direction.