SPX - Wyckoff and How to Trade a Crash
Updated
Idea for SPX:
- While it is early to call the reversal, there is a confluence of macro factors that suggest a market top and a deep correction in the near future. This could be it.
- This is what I am watching technically for the local movements for SPX specifically.
- Much caution is needed here, as even if it is the reversal, breakout traders may be chopped both ways. Sometimes, we must have patience.
- It is possible that a local Wyckoff Distribution has been completed.
- Need confirmation of the UTAD Test > LPSY > SOW.
- Looking for a confirmation of a descending ML Channel.
- Rising Wedge may need to be re-tested for LPSY.
- 4000, 3800, 3700 seem to be likely in the initial drop, should they bounce - need to watch for a stalling out to confirm a descending channel, or a rally to ATH. It is possible that UTAD Test has yet to occur.
- If rallies, UTAD Test may reach 4400+ before the actual drop.
- I will be using Trailing stops and prop indicators, in order to not leave money on the table, as chances are high for a generational bubble top and crash.
- Of course, we can't leave out the possibility of a Black Monday.
Some words of wisdom from Jesse Livermore and others:
“How I screwed up my bear market trade”
"I studied the situation in 1906 and I thought that the money outlook was particularly serious. Much actual wealth the world over had been destroyed."
"The earthquake and the fire in San Francisco and other disasters touched everybody—manufacturers, farmers, merchants, laborers and millionaires."
"And now when I decided to sell I plunged. Since we undoubtedly were entering upon a genuine bear market I was sure I should make the biggest killing of my career. The market went off. Then it came back. It shaded off and then it began to advance steadily. My paper profits vanished and my paper losses grew. One day it looked as if not a bear would be left to tell the tale of the strictly genuine bear market. I couldn’t stand the gaff. I covered. It was just as well. If I hadn’t I wouldn’t have had enough left to buy a postal card. I lost most of my fur, but it was better to live to fight another day."
"I had made a mistake. But where? I was bearish in a bear market. That was wise. I had sold stocks short. That was proper. I had sold them too soon. That was costly. My position was right but my play was wrong."
"If you begin right you will not see your profitable position seriously menaced; and then you will find no trouble in sitting tight."
"Between my first glimpse of the storm cloud and the time for cashing in on the big break the stretch was evidently so much greater than I had thought that I began to wonder whether I really saw what I thought I saw so clearly."
"Still some of the great financiers talked hopefully—at least to newspaper reporters—and the ensuing rallies in the stock market gave the lie to the calamity howlers."
"That was the first time that I had seen big money ahead, and I naturally started toward it on the run. Before I could reach the dollar-pile my wind went back on me and I fell to the ground. The pile of dollars was still there, but I had lost the shovel, and the wagon was gone."
"I should have walked and not sprinted."
"That is how I came to learn that even when one is properly bearish at the very beginning of a bear market it is well not to begin selling in bulk until there is no danger of back-firing."
"The first eighth and the last eighth are the most expensive eighths in the world for any trader"
- Lefèvre, Edwin. Reminiscences of a Stock Operator
The market that Livermore traded:
"The Bear Market of 1907 is remarkably similar to those in 1929, 1987, 2000, 2008 or now. While each bear market is unique they all have similar characteristics, like frustrating fits and starts coupled with “rip your face off ” rallies."
"When you see a huge pot of gold at the end of your trade, be afraid. Very afraid."
- tradersprofitcompass.com/lessons-from-jesse-livermore-my-trading-mistakes-during-the-1907-bear-market/
"The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have made in the past." - Thomas F. Woodlock
"The sucker has always tried to get something for nothing." - Thomas F Woodlock
Once it starts, don't look back.
"Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig. It takes courage to ride a profit with huge leverage." - Stanley Druckenmiller
GLHF
- DPT
- While it is early to call the reversal, there is a confluence of macro factors that suggest a market top and a deep correction in the near future. This could be it.
- This is what I am watching technically for the local movements for SPX specifically.
- Much caution is needed here, as even if it is the reversal, breakout traders may be chopped both ways. Sometimes, we must have patience.
- It is possible that a local Wyckoff Distribution has been completed.
- Need confirmation of the UTAD Test > LPSY > SOW.
- Looking for a confirmation of a descending ML Channel.
- Rising Wedge may need to be re-tested for LPSY.
- 4000, 3800, 3700 seem to be likely in the initial drop, should they bounce - need to watch for a stalling out to confirm a descending channel, or a rally to ATH. It is possible that UTAD Test has yet to occur.
- If rallies, UTAD Test may reach 4400+ before the actual drop.
- I will be using Trailing stops and prop indicators, in order to not leave money on the table, as chances are high for a generational bubble top and crash.
- Of course, we can't leave out the possibility of a Black Monday.
Some words of wisdom from Jesse Livermore and others:
“How I screwed up my bear market trade”
"I studied the situation in 1906 and I thought that the money outlook was particularly serious. Much actual wealth the world over had been destroyed."
"The earthquake and the fire in San Francisco and other disasters touched everybody—manufacturers, farmers, merchants, laborers and millionaires."
"And now when I decided to sell I plunged. Since we undoubtedly were entering upon a genuine bear market I was sure I should make the biggest killing of my career. The market went off. Then it came back. It shaded off and then it began to advance steadily. My paper profits vanished and my paper losses grew. One day it looked as if not a bear would be left to tell the tale of the strictly genuine bear market. I couldn’t stand the gaff. I covered. It was just as well. If I hadn’t I wouldn’t have had enough left to buy a postal card. I lost most of my fur, but it was better to live to fight another day."
"I had made a mistake. But where? I was bearish in a bear market. That was wise. I had sold stocks short. That was proper. I had sold them too soon. That was costly. My position was right but my play was wrong."
"If you begin right you will not see your profitable position seriously menaced; and then you will find no trouble in sitting tight."
"Between my first glimpse of the storm cloud and the time for cashing in on the big break the stretch was evidently so much greater than I had thought that I began to wonder whether I really saw what I thought I saw so clearly."
"Still some of the great financiers talked hopefully—at least to newspaper reporters—and the ensuing rallies in the stock market gave the lie to the calamity howlers."
"That was the first time that I had seen big money ahead, and I naturally started toward it on the run. Before I could reach the dollar-pile my wind went back on me and I fell to the ground. The pile of dollars was still there, but I had lost the shovel, and the wagon was gone."
"I should have walked and not sprinted."
"That is how I came to learn that even when one is properly bearish at the very beginning of a bear market it is well not to begin selling in bulk until there is no danger of back-firing."
"The first eighth and the last eighth are the most expensive eighths in the world for any trader"
- Lefèvre, Edwin. Reminiscences of a Stock Operator
The market that Livermore traded:
"The Bear Market of 1907 is remarkably similar to those in 1929, 1987, 2000, 2008 or now. While each bear market is unique they all have similar characteristics, like frustrating fits and starts coupled with “rip your face off ” rallies."
"When you see a huge pot of gold at the end of your trade, be afraid. Very afraid."
- tradersprofitcompass.com/lessons-from-jesse-livermore-my-trading-mistakes-during-the-1907-bear-market/
"The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have made in the past." - Thomas F. Woodlock
"The sucker has always tried to get something for nothing." - Thomas F Woodlock
Once it starts, don't look back.
"Soros has taught me that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig. It takes courage to ride a profit with huge leverage." - Stanley Druckenmiller
GLHF
- DPT
Trade active
At last, QQQ has finished it topping structure: 
Trade active
SPX has been at a key resistance for 2 months while tech CEOS (Zuckerberg and co.) distributes shares relentlessly:Of course, they aren't the only ones doing so.
marketbeat.com/instant-alerts/nasdaq-fb-insider-buying-and-selling-2021-06/
Market climbs to ATH on miniscule volume with declining market breadth:
PC ratio at a low for a prolonged period - it has never done this for over 10 years:
While SKEW is at an ATH:
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More Risk Factors that suggest a top: 
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A Thought:The crowd becomes outraged when someone dares to suggest anything other than "the market only goes up"...
"Look at the number, the number is going up. Only look at the number."
"The number went up today!"
"No one can predict the future. It's impossible, so just look at the number... Do what everyone else is doing. Do what the number tells you to do."
Fed Balance Sheet YoY % drops off,
Fed raises RRP rates and overnight RRP shoots to nearly
1T,Margin debt at ATH,
Global credit impulse now negative...
The market will continue to rise. How? Where is the money coming from?
The rally up till now had been fueled by easy lending, but the Credit Cycle has turned down. Liquidity flows are decelerating and being pulled out of the system.
Who now will bid up the price at these heights?
Where is the money coming from? Does the number just magically go up?
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Very clean selling pressure signal on DJI: EU:
DAX:
Likely the flows to watch are EU > DJI > SPX, as ECB has been the driver of global money printing (even more than the Fed).
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Delta Variant possibly the 'catalyst' for the trigger: 
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"Central banks have bought $900 million of financial assets every hour in past 15 months"."only a market crash will prevent global central banks tightening next 6 months."
- BofA
They don't change the narrative before the move... They shift the narrative after the regime has changed, underlying conditions have changed already.
Liquidity flows are negative. No more money in, but money out.
After distribution is complete, they tell the population.
It took 900m of buying/hour to bid up the market to these levels... Now who is buying?
Commodities already have the right idea. Only a matter of time. mid July at the latest for the reversal IMO
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There seems to be a sentiment that we will have plenty of warning for a market crash, and we will all know months in advance to slowly scale out... And that this hasn't happened yet... Jerome will tell us clearly to "Sell Now" when the time comes. Complacency..."Markets have hit a permanent plateau..."
'It cannot go down...'
'It will be different this time...'
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Conditions are ready for a gamma squeeze to the downside, starting Monday: Trade active
Typically, US yields and tech move inversely to each other (order phase), and when they move together (disorder phase), it signals a significant move to the downside.Yields would significant momentum to break this 40year trend, and equities/yields have already shifted toward positive correlation.
It makes sense, as in times of bullishness, risk assets would be favored over lesser yielding bonds, while in times of risk-off, equities will be sold off in favor of more secure bonds:
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One of the leaders for the next move to watch, financials:
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NQ seems to be at or near a peak: Leaders were XLF, XLE, XLK.
We know XLF will be cut down from liquidity issue, XLE seems to be peaked, markets are waiting on OPEC+ production increases (historic amount of oil production being withheld by OPEC+ is the only reason prices have yet to plummet). XLK seems to be ready to be cut down by antitrust or crypto exchanges.
Every other sector seems to have turned down or already crashed.
Not simply speculation, as catalysts accompany technical moves and technical moves support market top idea.
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It will be different this time!Trade active
NYSE topped and short entry signal: 
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Now look, Oil reached a key level. After OPEC, it can fall: Trade active
Evergrande seems to be the leader: 
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Its on, will need to adjust for the reversal levelTrade active
Speculated move now is downtrend into Sept quad witching where capitulation will occur.Mid July is vanna hedging period, coincides with expectations of o/n RRP effects spilling over into stocks, within expectations to have a high CPI print on Jul 13.
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OPEC+ likely factor as crude at a 40y downtrend resistance, hard to break that.Also, Delta variant death curve should follow the confirmed curve around that time.
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Now Western Asian markets feeling effects of the global trend, spillover to West Jul-Aug: 
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Oil at the resistance - Everything is ready: 
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Coronal hole detected - Solar wind Jul 12-14Trade active
Situation is rather grim:Yes FAANGM still strong, but they are the last last last line of defense. Always crash effects them last.
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Did I get the exact top?Trade active
bonds and oil telling something terrible comingTrade active
US Credit (Junk + Leverage) rolling over: Trade active
Some updated TA - Rising wedge short:Now, the 50 DMA has proven to be a strong support, so likely not broken first try, but after a small relief rally (possibly 4300~), should test it again and 4166 would be next.
This week, especially after Wednesday VIX expiration, a gap down through 50 DMA is likely to start off a deep sell-off.
Pretty much every component is down with terrible market breadth, but I would watch oil or BTC to bring it down:
If it holds out until then, EOM watch for tech earnings sell the news and the much awaited Robinhood IPO legendary dump
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So now is the time to watch for an LPSY (4300-4350).Small caps are at a support level, could break, but could return to the ML before decision:
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But Cyclicals not catching a bid, and is already there - DJI should give more indication of where we are heading next: Trade active
Euro seems to be on the precipice, it leads risk assets: Trade active
As well as Bond yields - they say bonds dont lie: Trade active
Now it is perfectly at the wedge bottom re-test. Here is my entry, but will be watching for invalidationTrade active
We tried short at wedge re-test, but need to be vigilant here.MRNA SP inclusion, VIX expiry, FOMC, Delta fears this week.
Clearly price returned to POC line, it is actually quite meaningless - collecting premia of breakout traders... Now we can see the dealer's hand tomorrow.
Want to avoid the wedge fill:
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Watch out for Wedge fill now - We are losing steam for sure, but it doesnt mean it cant go higher first - watching these levels for a potential re-short entry:Trade active
Updated plan - Divergences:
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FAANG needs blow off tops to begin reversals - we are pretty much there:Trade active
We will probably get the pullback next week or 2, but with infrastructure bill on deck and a possibility of Congress to blow the bubble over the debt limit, need to plan for invalidation of this target. If it doesn't stay below the 50DMA on the next pullback, we will need to back off and try again later.Sept quad witching would be the next obvious short opportunity -
The longer the can is kicked down the road, the more glorious will be the short.
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The crowd is thinking that earnings will be a boon for tech:Very close to the end now IMO
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The gears are turning in Asia:Trade active
big tech earnings beat turned out to be sell the news - who coulda predicted it?Now need to watch Robinhood IPO and continuation of crash in China
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Robinhood IPO tomorrow:
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If it breaks over this res and hold in the next week, I will have to take the loss for now: However, it appears to be a mere deadcat bounce for China and Hong Kong:
FAANG slipping after tech earnings:
Yields still slipping:
Debt ceiling has yet to be addressed in the US.
Global Credit impulse still negative and yet to spill over into equities.
Still short.
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AMZN earnings:PINS:
VIX still holding higher lows:
China High Yield capitulating:
The China stock bounce today was a mere deadcat:
This is it
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Let me add for posterity:- Rydex bull/bear positioning ATH.
- Index PCR (elevated) vs. Equity PCR (low). Smart money doesn't buy the sucker's rally.
- Margin debt ATH.
There are no bears left.
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Nikkei starting off the next downswing - going into bear:
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IMO for NQ:
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We saw big tech earnings:Guess what, now its Big Oil earnings:
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Big Oil has a lot of room to fall: 
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Congress needs to pass 4 bills: eviction moratorium, infrastructure, budget for 2022, and debt-limit extension. They have 7 days in Committees and then 10 days to argue and vote between now and Oct 1st, to do all this. Then the treasury goes into default.Trade active
Say you want to keep it simple:The Golden Ratio:
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Last update to this post I think. Time for a wait and watch... It seems to be the tipping point anyway: 
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