SPX - The Sound of a Shattering Iceberg
Updated
Last week's SPX call was pretty accurate in terms of levels. What was wrong was only the order of operations and timing.
ES SPX Futures - Welcome to FOMCmageddon
I had felt it made sense for the market maker to sweep out the lows before taking the highs, but the plan was the opposite, and this actually adds credence to the theory that the markets are topping.
Something to keep in mind about calls for new all time highs, that we're hearing everywhere now, is that equities generally don't moon in high interest rate environments, and every central bank that matters in the world except for Japan is playing with 3-5%.
And nobody is cutting.
Warren Buffet said to "be fearful when others are greedy" and it's really a piece of wisdom you ought to take to heart, right now.
Something I would like to tell you is that tops and bottoms are, 100% of the time, hindsight calls. There is no way to actually accurately predict a top and a bottom before it unfolds.
What you can do as a trader, however, is anticipate that certain levels are the target, and look to see if price action and other covariances and fundamental factors confirm the theory if price trades to that level.
Then, using risk management and some rational logic, one can take the position, and shift their bias. If you can read the map and execute, you'll make a lot of money.
Otherwise, you can only make money if you're lucky, and few are particularly lucky, since we're all just mortals.
There's some problems with the "more uppy for more longer" theory.
A core factor is that the beginning of July marked a quarterly shift, and the entire month has been even more up.
There are now only August and September remaining. If it's not SPX 5,500 coming this year, the reversal is probably going to be violent, it stands to reason.
Another really crucial core factor is the geopolitical situation between the International Rules Based Order, which Washington ostensibly heads, and the Chinese government under Xi Jinping.
A really noticeable characteristic of all the clamoring in the propaganda machine is that they never go after "The Chinese Communist Party," they always go after "China" and Xi.
You should always remember this adage: "China is not the CCP."
You should always remember that when someone is attacking the world's only 5,000 year old culture and nation, the world's largest and most rich in natural resources and talent, they're likely to be Fabians.
Although Xi is, and has been for a decade, the leader of the CCP, the most notable thing about him is that he has never persecuted Falun Dafa's 100 million practitioners, who have been subjected to organ harvesting genocide under the edict of former Chairman Jiang Zemin starting July 20, 1999.
In fact, Xi has actually protected Falun Gong in Hong Kong, hitting thugs who target the practice's spiritual cultivators with the Anti-corruption Campaign, after the National Security Law and John Lee were installed as Chief Executive.
It's notable that John Lee has been denied entry to San Francisco for the APEC economic summit in November by Joe Biden, on that account.
All of this is to say the geopolitical chatter you hear on "China" is a disaster waiting to happen with "Taiwan."
Speaking of Taiwan, I really believe that TSM (Taiwan Semiconductor Manufacturing Corporation) is a significantly potent long to hedge with if the U.S. equities market goes sideways:
]TSM - Taiwan, Your Semiconductor Long Hedge
But "Taiwan War" does not mean that Xi is going to invade. The CCP is heavily weakened from the pandemic and in no position to be attacking an island that will become the Ukraine proxy war, but on a whole other level.
If Xi were really an idiot, the IRBO and the Jiang Faction would have been able to kill him years ago.
Instead, the CCP is about to fall, and what the IRBO is looking to do is depose Xi and replace him with a submissive and groomed toady from Taiwan, Maidan Revolution style (see Oliver Stone's film Ukraine on Fire).
If Xi is smart, he will weaponize the persecution of Falun Gong to defend China and himself, because Wall Street and the world government have been continuously going to Shanghai to train Marxism with the Jiangling toads, which means bloodying their hands in the persecution as "insurance."
Google the Neil Heywood story and give it some sober thought.
Back to price action and trading on the most important index right now: other risks are that both the Nasdaq and the Dow also took out the same pivot, and reacted in identical ways:
Another is that the VIX, which is already anomalously low, but won't print a single digit handle, has printed higher lows, followed by a breakout and retracement:
While 10-Year Treasury bonds, important because they represent the "Risk Free Rate," meaning huge, long term money can park cash here instead of taking risk in equities, look like a nightmare. (Rates up = bonds down)
It looks like a nightmare because Jerome Powell again said during the Q&A portion of the FOMC press conference that the inflation target is 2% while it's still 3.8% (What's 90% among friends?), that rate cuts aren't coming, and further pausing is totally contingent on economic data being spectacular in favour of deflation.
(Is not happening).
And all of the above is confirmed by the US Dollar Index's higher time frame candles showing the dump under 100.00 was really just a raid, and we're about to get our upside to 108+ on.
So, here's what I expect to happen as soon as Monday:
I believe, based on the price action that unfolded Thursday and Friday of this week, that the market makers will take advantage of Monday, July 31 to print the high of the month, breaking the 4,630 level to roughly 4,650.
This will kill all the short traders who entered early and shorted Friday, and bring in a great number of breakout traders.
I am anticipating (the key word is anticipating!) this will be a major bull trap and price will reverse.
The confirmation will be if price does retrace and takes the 4,544 level.
If so, this is no longer a dip to buy, and entering shorts on retrace will be difficult because the market makers are likely to reprice aggressively away from their trap at the top.
It may seem like a dump to 4,544 compared to 4,557 isn't very significant, being 13 points after all, forming just another "higher highs lower lows" expansion pattern.
But what taking 4,544 shows, in reality, is that the biggest money now wants to take sell stops and begin to capitalize on "The Big Short."
The first target for August, if this pans out, will be the 4,411.25 level.
It looks really far away on the chart, but it's only 200 points. Only 5 percent. Compared to last year's volatility and ranges, it's not really that big of a deal, especially for a while month.
You've just been Pavloved to follow the ring of a bell.
Moreover, the 4,411 level is also July's low.
A factor that I believe may lead to the destruction of the markets is latent malignancy in the banking sector, with Charles Schwab being the standout problem, I chronicle below:
Charles Schwab - The Harbinger Of The Next Crisis?
A lot of people are going to kill themselves buying the dip and getting stopped out and buying the dip again and getting stopped out again, if this all transpires according to the thesis.
And people who don't use stops are going to get gapped down on.
And those gap downs will be runaways that don't come back this time.
Equities bulls are going to get gapped on like every day and have Barstool Sports Dave Portnoy '22-style meltdowns.
However, if all of this does not transpire and price continues to reach over 4,700, then we can only say that the target the market makers really aspire for is ALL the liquidity over the 2021 all time highs circa 4,800.
What we have is dueling possibilities, one far more likely than the other: topping being a lot more likely than a new all time high because the the environment is one where the Fed Funds Rate is going to be 6%+ by year end.
But we need price action to confirm the theory.
All of the above is my gift to you, as readers, followers, and even trolls.
Our human race and this Planet Earth may really be in for an "early autumn" this year. The implications will shock not only the equities markets, but every aspect of our daily lives.
I wish you all a bright future, but you have to believe and execute before you can see and harvest fruit.
It's up to the individual to cultivate their hearts and minds accordingly.
ES SPX Futures - Welcome to FOMCmageddon
I had felt it made sense for the market maker to sweep out the lows before taking the highs, but the plan was the opposite, and this actually adds credence to the theory that the markets are topping.
Something to keep in mind about calls for new all time highs, that we're hearing everywhere now, is that equities generally don't moon in high interest rate environments, and every central bank that matters in the world except for Japan is playing with 3-5%.
And nobody is cutting.
Warren Buffet said to "be fearful when others are greedy" and it's really a piece of wisdom you ought to take to heart, right now.
Something I would like to tell you is that tops and bottoms are, 100% of the time, hindsight calls. There is no way to actually accurately predict a top and a bottom before it unfolds.
What you can do as a trader, however, is anticipate that certain levels are the target, and look to see if price action and other covariances and fundamental factors confirm the theory if price trades to that level.
Then, using risk management and some rational logic, one can take the position, and shift their bias. If you can read the map and execute, you'll make a lot of money.
Otherwise, you can only make money if you're lucky, and few are particularly lucky, since we're all just mortals.
There's some problems with the "more uppy for more longer" theory.
A core factor is that the beginning of July marked a quarterly shift, and the entire month has been even more up.
There are now only August and September remaining. If it's not SPX 5,500 coming this year, the reversal is probably going to be violent, it stands to reason.
Another really crucial core factor is the geopolitical situation between the International Rules Based Order, which Washington ostensibly heads, and the Chinese government under Xi Jinping.
A really noticeable characteristic of all the clamoring in the propaganda machine is that they never go after "The Chinese Communist Party," they always go after "China" and Xi.
You should always remember this adage: "China is not the CCP."
You should always remember that when someone is attacking the world's only 5,000 year old culture and nation, the world's largest and most rich in natural resources and talent, they're likely to be Fabians.
Although Xi is, and has been for a decade, the leader of the CCP, the most notable thing about him is that he has never persecuted Falun Dafa's 100 million practitioners, who have been subjected to organ harvesting genocide under the edict of former Chairman Jiang Zemin starting July 20, 1999.
In fact, Xi has actually protected Falun Gong in Hong Kong, hitting thugs who target the practice's spiritual cultivators with the Anti-corruption Campaign, after the National Security Law and John Lee were installed as Chief Executive.
It's notable that John Lee has been denied entry to San Francisco for the APEC economic summit in November by Joe Biden, on that account.
All of this is to say the geopolitical chatter you hear on "China" is a disaster waiting to happen with "Taiwan."
Speaking of Taiwan, I really believe that TSM (Taiwan Semiconductor Manufacturing Corporation) is a significantly potent long to hedge with if the U.S. equities market goes sideways:
]TSM - Taiwan, Your Semiconductor Long Hedge
But "Taiwan War" does not mean that Xi is going to invade. The CCP is heavily weakened from the pandemic and in no position to be attacking an island that will become the Ukraine proxy war, but on a whole other level.
If Xi were really an idiot, the IRBO and the Jiang Faction would have been able to kill him years ago.
Instead, the CCP is about to fall, and what the IRBO is looking to do is depose Xi and replace him with a submissive and groomed toady from Taiwan, Maidan Revolution style (see Oliver Stone's film Ukraine on Fire).
If Xi is smart, he will weaponize the persecution of Falun Gong to defend China and himself, because Wall Street and the world government have been continuously going to Shanghai to train Marxism with the Jiangling toads, which means bloodying their hands in the persecution as "insurance."
Google the Neil Heywood story and give it some sober thought.
Back to price action and trading on the most important index right now: other risks are that both the Nasdaq and the Dow also took out the same pivot, and reacted in identical ways:
Another is that the VIX, which is already anomalously low, but won't print a single digit handle, has printed higher lows, followed by a breakout and retracement:
While 10-Year Treasury bonds, important because they represent the "Risk Free Rate," meaning huge, long term money can park cash here instead of taking risk in equities, look like a nightmare. (Rates up = bonds down)
It looks like a nightmare because Jerome Powell again said during the Q&A portion of the FOMC press conference that the inflation target is 2% while it's still 3.8% (What's 90% among friends?), that rate cuts aren't coming, and further pausing is totally contingent on economic data being spectacular in favour of deflation.
(Is not happening).
And all of the above is confirmed by the US Dollar Index's higher time frame candles showing the dump under 100.00 was really just a raid, and we're about to get our upside to 108+ on.
So, here's what I expect to happen as soon as Monday:
I believe, based on the price action that unfolded Thursday and Friday of this week, that the market makers will take advantage of Monday, July 31 to print the high of the month, breaking the 4,630 level to roughly 4,650.
This will kill all the short traders who entered early and shorted Friday, and bring in a great number of breakout traders.
I am anticipating (the key word is anticipating!) this will be a major bull trap and price will reverse.
The confirmation will be if price does retrace and takes the 4,544 level.
If so, this is no longer a dip to buy, and entering shorts on retrace will be difficult because the market makers are likely to reprice aggressively away from their trap at the top.
It may seem like a dump to 4,544 compared to 4,557 isn't very significant, being 13 points after all, forming just another "higher highs lower lows" expansion pattern.
But what taking 4,544 shows, in reality, is that the biggest money now wants to take sell stops and begin to capitalize on "The Big Short."
The first target for August, if this pans out, will be the 4,411.25 level.
It looks really far away on the chart, but it's only 200 points. Only 5 percent. Compared to last year's volatility and ranges, it's not really that big of a deal, especially for a while month.
You've just been Pavloved to follow the ring of a bell.
Moreover, the 4,411 level is also July's low.
A factor that I believe may lead to the destruction of the markets is latent malignancy in the banking sector, with Charles Schwab being the standout problem, I chronicle below:
Charles Schwab - The Harbinger Of The Next Crisis?
A lot of people are going to kill themselves buying the dip and getting stopped out and buying the dip again and getting stopped out again, if this all transpires according to the thesis.
And people who don't use stops are going to get gapped down on.
And those gap downs will be runaways that don't come back this time.
Equities bulls are going to get gapped on like every day and have Barstool Sports Dave Portnoy '22-style meltdowns.
However, if all of this does not transpire and price continues to reach over 4,700, then we can only say that the target the market makers really aspire for is ALL the liquidity over the 2021 all time highs circa 4,800.
What we have is dueling possibilities, one far more likely than the other: topping being a lot more likely than a new all time high because the the environment is one where the Fed Funds Rate is going to be 6%+ by year end.
But we need price action to confirm the theory.
All of the above is my gift to you, as readers, followers, and even trolls.
Our human race and this Planet Earth may really be in for an "early autumn" this year. The implications will shock not only the equities markets, but every aspect of our daily lives.
I wish you all a bright future, but you have to believe and execute before you can see and harvest fruit.
It's up to the individual to cultivate their hearts and minds accordingly.
Note
This kind of lethargy on the final day of July is often primarily to burn the premium of options and make 0DTEs expire worthless inside of a worthless range.But it may also mean that the indexes do not have new highs in their futures.
A bullish continuation, I suppose, would be a break under the 4,595 pivot.
Note
It's the August candle on futes, now.Note
So, all the targets and the thesis is still in play. It's just, is toying around 5 points under 4,600 on the first of the month really the time to go long?4558 is a lot more compelling. The greed sentiment is already at an extreme anyways.
Note
The futures gap down on session reopen on news that the U.S. credit rating has been downgraded is trading very bearishly and does not look like a dip that is wise to buy.We may see a large range day on both Nasdaq and SPX futures tomorrow, being Wednesday. If the market makers intend to take lows, I don't believe the 4,550 level would be all they would take.
4,530 would amount to an extra half a percent, which means another $2.25 on SPY. From there, if there really is support and a reversal pattern, we can look for longs in anticipation that the 4,650 thesis of this trade will crystalize circa mid-August.
Note
Technical breakdown achieved. 4,530~ achieved.The question now is do we trade higher or do we go after 4,400 first?
Note
Monday's bounce was so quickly and easily destroyed, which has really been VERY rare in these markets in the last 4 months.Looks like the target is the 4,415 level.
Note
The market makers are relatively clever and continue to print consecutive green candles after taking lows, which is a really common pattern, especially on actual stocks.It's kind of a series of bull traps, but it also serves to crush bottom shorters.
The question is, did we bottom?
Well, looking at SPY, probably not.
A similar dump into tomorrow might make Wednesday the buy of the week with CPI on deck for Thursday.
The narrative will continue to be "Federal Reserve going to pivot soon inflation so low!"
Note
PA right now makes me think that the market has either bottomed, or...Will run this red line on CPI and then trade deeper into 4,400.
Hard to tell which is which.
Note
Looks to me based on the price action that nothing is bottoming until SPX breaks 4,400. And maybe that will be tomorrow.
Related publications
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.