House of Cards - $585 before the crash
I'm unable to update my previous idea that I originally posted in February when
SPY was at the top. Going to make this brief and will add screenshots and additional notes once the structure of Wave (B) is confirmed or invalidated.
On the 500R chart ($5), the price has risen in a distinct 3-wave pattern labelled A-B-C, with C reaching the 1.236 extension of A and finding resistance at the 100SMA (yellow). The low of Wave (A) respected the boundary of the lower line of the regression trend I have added to the chart. While this trend started prior to what I am considering Wave (A), I still think it provides a good target for the top of the retracement.
Wave (c) of A of (B) (still following me?) is not confirmed as complete yet. It could extend as far as $584 without pulling back, however I anticipate the market building more liquidity on the way up while burning options in the process. I bought 3/28 $570p at the end of the day in case we see a 50%-61.8% pullback to $560-$563 by the end of the week. If that happens, we should have enough room to reach the upper band at $585, which would be a little over a 50% retracement of Wave (A). This would also cause the price to touch the 200 SMA (green), which is common in the first major retracement of a bear market.
Lastly, from a psychological perspective, the market reached an overwhelmingly bearish consensus from mid-February to mid-March. Sentiment during Wave (a) was mostly bearish, but sentiment has shifted positive since the price entered Wave (c) and gapped up on Monday, resulting in a >+1% day. This sets the stage for a rug pull and subsequent bear trap for late sellers who will assume the downtrend has resumed prematurely.
We'll see how this plays out. I'll switch to calls if a higher high is made Wednesday 3/26. Good luck to all.
I'm unable to update my previous idea that I originally posted in February when
SPY was at the top. Going to make this brief and will add screenshots and additional notes once the structure of Wave (B) is confirmed or invalidated. On the 500R chart ($5), the price has risen in a distinct 3-wave pattern labelled A-B-C, with C reaching the 1.236 extension of A and finding resistance at the 100SMA (yellow). The low of Wave (A) respected the boundary of the lower line of the regression trend I have added to the chart. While this trend started prior to what I am considering Wave (A), I still think it provides a good target for the top of the retracement.
Wave (c) of A of (B) (still following me?) is not confirmed as complete yet. It could extend as far as $584 without pulling back, however I anticipate the market building more liquidity on the way up while burning options in the process. I bought 3/28 $570p at the end of the day in case we see a 50%-61.8% pullback to $560-$563 by the end of the week. If that happens, we should have enough room to reach the upper band at $585, which would be a little over a 50% retracement of Wave (A). This would also cause the price to touch the 200 SMA (green), which is common in the first major retracement of a bear market.
Lastly, from a psychological perspective, the market reached an overwhelmingly bearish consensus from mid-February to mid-March. Sentiment during Wave (a) was mostly bearish, but sentiment has shifted positive since the price entered Wave (c) and gapped up on Monday, resulting in a >+1% day. This sets the stage for a rug pull and subsequent bear trap for late sellers who will assume the downtrend has resumed prematurely.
We'll see how this plays out. I'll switch to calls if a higher high is made Wednesday 3/26. Good luck to all.
Trade active
Successful trade. I would have had a better entry had I gotten in after the open rather than the night before but I was still able to book a net profit of 310%.
SPY got close but failed to close the $565 gap, finding support on the 200MA on the 100R ($1) chart. Overnight we are above the Call Kill lines and will likely retrace to ~$571 during tomorrow’s session. The price has sold from this level several times and I would expect to see it do so again. Likewise, there is significant support at $560, so I would target that area as the low for Wave (c). Plan for Thursday is to look to reenter puts as long as they do not make a lower low, signified by the Put Kill - Daily line at $573.Trade closed manually
SPY is gearing up to make a big move this week. Trade policy uncertainty has been the fundamental basis for the bear market and we will finally get insight into the extent of reciprocal tariffs today. There will be a press conference in the White House rose garden at 4pm EST, however it is possible that the news will be released beforehand. Tuesday’s close left us at a somewhat neutral point but tomorrow’s opening should provide clarity on which direction the price will go. In my previous updates to this idea I suggested that
SPY would hit the $580s before staring Wave (C) of the larger bear trend. While this is still possible, the price action during Monday and Tuesday’s sessions suggest that the market is ready to sell off. Before I get into the technicals I will say that I am usually hesitant to follow the crowd (which is mostly bearish at the moment) and since the market has been pricing reciprocal tariffs in for several weeks, I think we are more likely to see a surprise to the positive side that could lead to a short squeeze, than a negative one. I’m in calls and puts with a wide target range of >$570 for calls and <$545 for puts by the end of week. Here are the two scenarios I’m watching for:
On the bullish side, the 1000R chart ($10) appears to show the price completing four swings since March 11 with higher highs and lower lows. Since this is part of a larger Wave B - this meets the criteria of an expanding triangle pattern. If this were to continue to play out, Wave (e) should reach a higher peak than Wave (c) - perhaps to the 1.236 extension above $580. As I’ve previously mentioned - $585 is an important level because it is the 0.618 extension of the first wave of the downtrend - a common reversal point. This idea would get us there.
On the bearish side, the price action this week looks very weak on the 100R ($1) chart, however I’m unsure of how to count it after the PM peak. All I know is that if the market starts selling this week, I would expect it to make a lower low by Friday’s close, which would mean a drop of more than 3%. Oscillators show the last peak had bearish divergence and at the time of writing
ES1! has not overcome the resistance, so I think a gap up is unlikely - unless driven by surprise news. Although the market looks like it could go either way, there is a way to get a quick read of whether calls or puts are in a better position to win for the day. In order to do this, we can apply the same technical analysis that we use for stock on options and compare them.
Above are two 4/4 options contracts - both out of the money with a similar strike. 565c is on the left and 555p is on the right. I’m counting both trends as if they were bullish to see which one gets invalidated first. For calls, we could be entering Wave 3 of a larger uptrend. This idea will only be valid if the premium stays above $2.50.
For puts, 555p is at the 50% retracement of last week’s uptrend and will be on track to make a lower low or reverse off its closing premium to make this a higher low. This idea will only be valid if the premium stays above $3.00. If 555p is going to reverse into a larger Wave 3, it could surpass Monday’s high and coincide with a major drop for $SPY.
With this information in mind, using an options calculator I can estimate the price
SPY will hit around today’s open to reach these levels, which I call the Call Kill and Put Kill. As the name implies, these are horizontal lines I plot on the SPY chart to signal the points where the bullish TA on either contract is invalidated. 565c will make a lower low if
SPY opens below $558.50 and 555p will make a lower low if SPY opens above $560.75, as shown on the chart. I have found this information is useful due to the fact that out of the money options contracts have higher sensitivity to price movements than a stock, while still having price action that adheres to the rules and guidelines of Elliott Wave Theory (within reason). We’ll see what is in store for us tomorrow. I lean bearish but there is still a good chance for most of us to get April Fooled.
(it looks like TradingView is forcing me to "close" this trade to update the Idea so I'll have more on this on a later post.)
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.