Morning Thoughts

The 11th Commandment

Last night a friend asked me” So what do you think the market will do tomorrow morning”. I laughed and said that if the futures were either up 20, down 20 or unchanged I would not be surprised. This market is held hostage to news and correlation is so high that anything is possible. So lets take a step back and get a bigger picture view. Looking at SPY we have lower highs & lower lows, until that changes, the major trend is down.

I’m not a huge Elliott fan as it is so subjective most practitioners change their view so easily (usually acting as if their previous prognostication never happened), but when it is right it can be uncanny…. And sometimes the count just jumps out at you so take this as a possibility to be aware of rather than a set in stone prediction. So it looks like we’ve completed waves 1, 2 and 3 of a potential 5 wave down move. The rally from the lows looks flaggy. If wave 5 = wave 1 that gets us 126.75, if wave 5 = wave 3 then it's 121.12. From a Cloud perspective, Kumo resistance is much higher around 138 and the cloud is thin. The Chikou (thick cyan line) is inside a rising cloud. I think that it breaking down out of the cloud, currently 132.40 may well be the signal that wave 5 is underway.  On the upside resistance is 135.42-135.72 where the Kinjun-sen, the 20 & 100 SMA’s reside. There is also a gap fill from 5/11 at 135.53 (visible on an hourly chart, and a significant low at 135.76 from 4/10.

VIX remains over 20, and as long as that condition persists, caution is warranted. In other words, I wouldn’t be short downside puts  into a decline. And as always, remember the 11^th Commandment.