DJIA: No Divergence Yet; Expect TL test and higher doubletop ATH
Updated
We have breakout of the consolidation pattern and bullish RSI. Look back (scroll left) to see the double top Sep 20 - Oct 03 2018; note RSI diverged with lower reading on ATH 3 Oct even as price made higher high. We knew then it would sell. We don't have that yet a year later; we have an ATH; but RSI still not maxed c/w prior highs, I do expect a pullback to retest TL from this price zone before moving higher to a double top higher ATH, this could happen next week, or price could linger here even longer.
After the TL test a melt-up blowoff to new ATH should show us the RSI divergence as prices washout. Only then would shorting be good R/R.
Dow Theory: The Trend Continues until a Clear Reversal occurs; Didn't get there yet!
investopedia.com/terms/d/dowtheory.asp
That said, I am short at this price to capture a bull market pullback TL retest, a very characteristic price move after a breakout rally. Do NOT expect a big selloff, the sentiment is strongly bullish and should remain so into the New Year. Any pullback should get a strong bounce from 26800-26950 zone. Selling will likely only last for a few days, perhaps only two or three sessions before bulls pile back in on FOMO. Trend is Bull, and Countertrend moves rarely last more than 9 sessions, typically 5-6 at most.
The subsequent melt-up rally will be a stunning parabola like the one we saw in Jan 2018 IMO. Could drive VIX under 10 again. Will be watching for that signal!
After the TL test a melt-up blowoff to new ATH should show us the RSI divergence as prices washout. Only then would shorting be good R/R.
Dow Theory: The Trend Continues until a Clear Reversal occurs; Didn't get there yet!
investopedia.com/terms/d/dowtheory.asp
That said, I am short at this price to capture a bull market pullback TL retest, a very characteristic price move after a breakout rally. Do NOT expect a big selloff, the sentiment is strongly bullish and should remain so into the New Year. Any pullback should get a strong bounce from 26800-26950 zone. Selling will likely only last for a few days, perhaps only two or three sessions before bulls pile back in on FOMO. Trend is Bull, and Countertrend moves rarely last more than 9 sessions, typically 5-6 at most.
The subsequent melt-up rally will be a stunning parabola like the one we saw in Jan 2018 IMO. Could drive VIX under 10 again. Will be watching for that signal!
Note
I'm straddled, with long Jan puts in Bear spreads; I tightened these up to $2 spreads so there's a lot of credit on the short weeklies if it pops Monday, is well-hedged.In EOD trade I plunged into Nov weekly calls on SPY. Seems likely to bull once more early next week. At 16:14 I bought 20 more Monday daily 309 calls, lol. If it pops the .40c contracts will be $2, let's see! Good weekend all!
Note
Been studying the Fibos on this price action. Expecting a pullback to retest TL breakout from 27200; subsequent bullish impulse to new ATH Target 28668 - 29154.Trade active
Still hanging on to Dec 278 DIA puts. Added UVXY shares and VIX $15 calls.I realize I've ignored DOW Theory rule on Trend: "It continues until clear reversal."
Taking a chance here! ALways chancy...
IMO after six weeks of just about vertical wall-climbing, MFI is dropping off and although we don't see divergence in RSI on index yet, we do see divergence in DJT today, getting pushback from 11K resistance. Market is ripe for a pullback IMO.
Note
More reading fun: this bear maven calling for a 3-5% correction based on high level of fund investment (all the money is already in market at these prices) and crush on VIX (complacency at near record highs); just sayin': marketwatch.com/story/do-not-show-these-ominous-charts-to-stock-market-bulls-says-strategist-who-sees-a-correction-forming-2019-11-12?mod=mw_latestnews
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Digging deeper into the above link; notice the chart on GAAP PE vs SP500 profits; see the TL over 20 years, as PE/Profits rise parabolically it reaches unsustainable levels, exactly where it trades now; notice the corrections in 2000 and 2018 bracket a larger correction in 2008; if EW theory of alternating waves is applicable, the next Big Sell will be a Monster Crash!Note
Feels like nearing inflection pivot; hold on!Note
Futurz sugges another Bully Friday shaping up overnight. Not to panic. Price is within 1% of pivot at this level IMO. Add if we get a pop and expect gaps to fill!Note
Looks like a Fifth wave extension to double top. Overbought 99% now; and NQ formed the Titanic and Hindenburg cross yesterday on 14 Nov, internal divergence:marketwatch.com/story/an-ominous-sounding-hindenburg-omen-and-a-ohama-titanic-syndrome-are-forming-in-a-key-stock-market-index-2019-11-14?mod=home-page
When complacency and greed reach maximum it will break sharp and sudden. be ready!
Trade active
Rolled the 278s into 280s, Dec strikes. Made enough from the short log of spreads twice rolled up to pay for the long leg rollout. Such fun! Woulda been more fun to hold Bull spreads, lol, o well! IMO we got a setup for a pinbar forming here, with tiny needle Doji on Monday 18th; let's see...Trade active
Rolled out of my 06 Dec strikes on the gap down and shorted the retracement, legging back into Dec 31 280P. Looks like it has started downslope; and the double top is in place.IMO we are at pivot to downtrend, a counter-trend movement in bullish impulse; these last typically from 3-6 sessions, and might retest the rising TL around index 26800, which will likely spark the parabolic race to ultimate ATH target 28860 - 29155.
Fibonacci time pointed to pivot into decline beginning 19 Nov; this arrived timely. Expect a week or two of consolidation before another pivot back into last leg uptrend. It should be stunning in its irrational exubarance and unbridled enthusiasm!
Trade active
Closed out the shorts and took a few Dec calls in a bull spread, as indices appear to be forming higher low. Pattern has been a smallish sell followed by more FOMO BTFD. Take what the markets give. Holding UVXY and April $20 VIX calls for long-term bear bet. Play ur hand close to chest IMO; good chance to get scalped on whipsaws. I rather expected a real double top with return to prices near the ATH before the real break. Wildly unpredictable!Trade active
Shorting EOD rally which is typically ~70% short-covering. Taking the 31 Dec 278P in bear spread vs Friday's 277s.Note
Just be aware this greedy monster can suddenly BULL up again without warning! Don't go crazy on shorts until we get signal confirmation IMO. I took small 31 Dec put positions with 5 contracts. Holding on to the bull spread in case of madness!Note
Get a slip of paper and hold up to the chart above along the rising TL from 3 Oct - 15 Nov; notice how Friday's weak rally tickled the underside of TL ,just kissed the line; this is characteristic of beginning downtrend when bulls try to rally the fading uptrend, it will 'kiss the line' and then rejected lovers turn away, down she goes.Note
Double topping IMO
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