SPX DownTrend to Correction OR Crash; Oil/Gold Divergence!
Updated
Looks like a crash setup. Powerful bearish divergence in oil - dropping while gold rockets. Last seen this divergence in 2000, 2008 just weeks before the crashes.
Probably not a good idea to sell puts short right now... Fool's rally going for a day or two; if we see a pinbar that would be identical confirmation pattern we saw in Aug 2008.
Rally could get as high as 26200 Dow, near 2880 SPX; or just get rejected from the down channel TL. Getting long in here is pretty risky. Scalp if you dare! GLTA!
MW Article: marketwatch.com/story/buckle-up-when-oil-and-gold-trade-like-this-it-usually-spells-doom-for-the-market-2019-06-04?mod=mw_theo_homepage
The Chart of Divergence: ei.marketwatch.com/Multimedia/2019/06/04/Photos/NS/MW-HK777_D8J9YD_20190604124502_NS.png?uuid=19216718-86e8-11e9-9462-9c8e992d421e
Probably not a good idea to sell puts short right now... Fool's rally going for a day or two; if we see a pinbar that would be identical confirmation pattern we saw in Aug 2008.
Rally could get as high as 26200 Dow, near 2880 SPX; or just get rejected from the down channel TL. Getting long in here is pretty risky. Scalp if you dare! GLTA!
MW Article: marketwatch.com/story/buckle-up-when-oil-and-gold-trade-like-this-it-usually-spells-doom-for-the-market-2019-06-04?mod=mw_theo_homepage
The Chart of Divergence: ei.marketwatch.com/Multimedia/2019/06/04/Photos/NS/MW-HK777_D8J9YD_20190604124502_NS.png?uuid=19216718-86e8-11e9-9462-9c8e992d421e
Note
Hangman Doji at 20MA; filling in the chart.Trade active
FYI I stopped out shorts as my long puts went OTM, that is my signal to close. When to re-enter? It's a bear rally, but they can get pretty far and surprise!
Analysis:
Look back at Nov/Dec; each rally lasted 7-10 days and rose 200 SPX/2k Dow pips in Nov, 170 SPX/1700Dow pips in Dec, and each rally was in the form of an ABC countertrend move whch retraced 0.62 - .50 of the previous decline. If this pattern follows suit, expect after the 230-pip drop in SPX in May a retracement of (0.50 - 0.62) 115 - 143 pips; we got 121 thus far. IMO 2868 - 2878 is a likely target box reaching back into April/May consolidation and resistance zones. The A-B-C pattern should emerge, a single down day or Harami typically on the 4th or 5th day of a week-long rebound would give us 'B'; either Friday or Monday. Countertrend move should complete between Tues/Weds 11/12 June. Continuation downtrend should give a double or deeper bottom, near EOM in June. Shorting too soon really cramps style... timing is all.
Trade closed: target reached
Elliot wave projection suggests we are in a new bullish uptrend cycle rather than continuation of the downtrend. The ABC correction has completed, and the lower prices provided a springboard for bullish sentiment (BTFD!). Expect a modest pullback after FOMC meet to 2820 - 2840 box; then an explosive irrationally exuberant wave higher into July + August. Possible new ATH in September. Pattern follows the '29 market behavior before the Crash on Black Tuesday October 29,1929. A new ATH was set on 3 September 1929, just before the Great Break. Let's see if history repeats itself; I'll close out this idea and start a new thread, based on EW theory. Let's see how it plays- huge opportunities IF we are on the right side of the trade!
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