Long

I spy $600

Updated

Hi everyone - I wanted to make a quick post with my thoughts on the next moves for using Elliott Wave Theory and Fibonacci Price/Time levels. I’m on my phone so I apologize if the chart screenshot looks cluttered.

is currently in a Primary W5 that should conclude in August. Yesterday we saw a spike after CPI came in cooler than expected, which completed the Minor W5/Intermediate W3 at $542.46.

The market also received disappointing news that the fed is only planning on one rate cut this year. This type of news bolsters the argument that we are entering an Intermediate W4.

I do not think this wave will last long and it could be choppy since Intermediate W2 saw a sharp move down after the extended W1. I will not go short on this trade and will wait to go long near the bottom of the channel ($530) around June 24th. As you can see on the volume profile, there is significant buying pressure at this level which will propel us into Intermediate W5.

The fifth wave will need to reach the Primary 1.618 price level and Primary 1.618 fib time marker. These levels cross on August 6th at $594. I think there will be psychological pressure to hit $600 since we’ll be in a PW5/IW5/MW5 wave. From there, I predict we enter a bear market that could also carry a negative news catalyst.

If the bear market is primarily technical without fundamental support, I predict the market will pick back up next year.

Note

Looks like I called an end to the (3) wave too early. I made the mistake of taking a small short position on 6/17 around $545.75 - thinking the breakout was a B wave, however I have revised my stance and believe we are still in (3) until we reach the next Fib cross sections.

I am now expecting to top $555 in the near future if bullish momentum continues today. The current minor wave 5 appears to be the extended wave (which I previously ruled out as a possibility since minor wave 3 appeared to be extended), and it could carry the price on low volume to the top of the channel.

The Minor Fib Extension (Blue, Right) overlaps at several points of the Intermediate Fib Extension (Grey, Left). On the chart, the Minor 1.272 and Intermediate 1.414 levels intersect with the 1.382 Fib Time Extension on 6/28.

I plan on getting back into calls with a price target of $568. With data being reported in the morning, there is a possibility that the price pulls back to as low as $542.75 to find demand.

I plan on assessing which side has momentum in premarket to decide if I buy calls at open or after a pullback.

Note

Entered July 31 560c. After today's price action, I think that momentum could be waning, so reaching the top of the channel ($565) appears unlikely. I have added a Minor Fib Time Extension (yellow, bottom) to the chart, which interestingly lines up with the Intermediate Fib Time Extension in a similar relationship to the Intermediate/Minor Fib Price levels.

Looking at next week's news, we have GDP being reported on Thursday (6/28) and PCE on Friday (6/29). It is around these dates that we see the Minor 1 time/Minor 1 price and Intermediate 1.382 time/Intermediate 1.272 price lines intersect.

For these reasons, I believe $555 will be the top for wave (3) and will exit my trade if this level is hit before next week's data prints. It is still possible we hit the top of the channel but I'd rather not take the gamble.

Note

Not going well so far. I have gone back to the drawing board to reassess where we're at in the near-term cycle. I still think we are in an Intermediate Wave (3), however I have changed my placement of the 1 and 2 Minor Waves.

I now consider May 22nd to June 3rd drop to be the Minor 2 Wave since it is more clearly visible on higher time frames and the April 26th to May 1st drop retraced more than 0.618 of Wave 1.

We are now in what I would consider a Minute A zig-zag of a Minor 4 Wave, which will probably end once the price retraces back to $540. There is a demand zone from $540-$542, so I will be watching for a reversal once the price hits that level.

If a bounce is unsupported by volume, I will consider it a Minute B wave. If things go that route, I think I will exit my calls either to breakeven or take a small loss. I expect to see the $537 gap get filled before the price

As you can see from the volume profile, will be bought up quickly below $537. Also keep in mind that the price can't go too much lower than that since there will still be a Minor Wave 5 that should push to at least $555.

I am going to place less importance on the Fib Time Extensions and mostly focus on PA from here on out. Still predicting $600 by EOY.

Note

This impulse has been difficult to gauge, but after noticing the triangle forming, it is now clear that we are in a 4th wave triangle that should conclude tomorrow - after that I predict the price will hit my original target of $555.

The 3rd wave was filled with gaps and irregular price movement. I entered calls too early and have been second guessing myself ever since, yet the Dollar, Yields, and VIX PA continues to indicate that the price of SPY is preparing for another move up, not down.

I’ve flipped back and forth but now believe the e wave of the triangle will play out in the morning. It will cause the price to drop to $542 or $540 if support is broken. This will lead many to believe the correct move will be to enter puts - but they will be wrong. There will be a quick reversal that will trigger the 5th wave that will bring the price to the 1.618 level ($555)

Note

Price action yesterday has me thinking the Wave (iv) triangle will have a longer duration than I expected. I went ahead and sold my calls for a loss so I can reposition. GDP and PCE are being reported this week, however I now think that neither will have a major impact on the market. Here is why:

Yields are unlikely to move much higher than 4.34%. There is major resistance there because the yield cannot enter Wave 1 territory. As a result, I think it will hover around this area for a few days before dropping. Also note that Wave 1 and Wave 3 have near perfect equality. This has me expecting an extended Wave 5 that will push back to 3.80% later this year.

With yields unable to move higher and Q2 ending, I do not see this as a scenario that will produce high volatility. Instead, I expect to complete the (c), (d), and (e) waves of the triangle over the next few days.

I am setting my reentry target at the end of wave (e), which I predict to be on Tuesday July 2nd at $541. There will be low volume next week due to the holiday but FOMC minutes next Thursday are sure to be a market mover. Targeting $555 by Wednesday July 10th.

Note

Regular flat A-B-C correction was completed last week. The price has now risen 2.30% since completing the C wave of (4).

The price has now retraced 161.8% of (4) and is losing momentum on the hourly chart. Since I am now counting this movement as Minor 1 of (5), I expect a pullback to occur sometime this week. is looking very bullish on all timeframes, so I would be surprised to see it drop below $550 but if it does, it should look for support at $547-$548 (0.618 level), as shown on the volume profile.

A quick look at and also shows formations that look triangular that also support the theory that is gearing up for its next impulse.

For the dollar, I’m counting the current wave as a Primary B that may be in Wave (D) of a triangle. I think DXY could be heading for as low as $102.50 by early September before moving higher leading up to the election.

appears to have found support and is preparing to rise to the triangle’s resistance line. I think the price could top $13 this week before declining to new lows. CPI is on Friday and there could be volatility leading up to it. The market may get jumpy about inflation again since the latest minutes from the fed showed a continued lack of consensus about cuts. If this happens, I expect it to be short-lived.

My last point in favor of a pullback this week is that if you look at the volume on recent red days, you will see selling pressure is continuing to rise. I think there will need to be a low-volume red day to shake out the last bears before the price rips higher. I am still very confident about $600 and expect it to be reached by early September.

Trade active

Today we saw what I am considering the conclusion of Minor 1 of (5). My notes on each of the minute waves:

(i): rise of 0.50%
(ii): declined 0.35%, retracing 0.618 of (i)
(iii): extended with a rise of 2.30%
(iv): declined 0.35%, retracing 0.146 of (iii)
(v): rise of 0.50%

We are now in a position where I find it worth taking the risk of going short for Minor Wave 2. I have entered July 19 $555 puts expecting to see the price to retrace 50% - 61.8% of Wave 1 ($548 - $550). I expect this level to be reached by the end of the week, at which point I will close my short trade and enter long dated calls for Minor 3 of (5), which should be a large impulse that can push above $570.

Today also saw and break out to the upside. I’m considering these both to be corrective moves, which will eventually reverse to make lower lows.

is also continuing to move towards the upper line of the triangle. Wave E could retrace up to 85.4% of D ($13.56) before the next big decline. Watch for this reversal as it could indicate a great long entry point for SPY.

Trade active

Entered puts a day too early and held on while the price rose nearly 1% on Wednesday. Unfortunate for me, however today’s PA supports my theory that we have entered a Minor 2 of (5). I have adjusted the Fib Retracement and the 0.618 level is now at $550. On the daily chart, this is also where the middle lines of the Bollinger Bands and Keltner Channels seem to be heading towards. This is a good area for a bounce and I plan on closing my puts there for a 100% profit and entering calls for Minor 3 of (5).

Today’s daily candle was a bearish engulfing, indicating lower lows are on the way. As I mentioned in my previous update, also notice how today’s volume was lower than the previous three red days that broke above the 21 day volume MA. If tomorrow is also red, I will watch to see if the volume makes a lower high.

On the 15 minute chart, there is a chance that the price retraces to 50% or 61.8% of A for wave B of Minor 2. This could happen with a gap up tomorrow, however I’m leaning towards a gap down after PPI is released.

Either way, I think $550 is a key level that should be retested before further upside. I’d like to be able to close puts on Friday and enter calls on Monday, however I will be prepared for a quick reversal and my calls will be dated long enough to where I don’t get Theta burned too badly.

Lastly, it appears that is keeping with the triangle pattern that I charted on the last update. I think there will be one last push to complete Wave E before volatility starts to go back down. The line chart is just the closing price, so a spike followed by a quick reversal could still keep the retracement of D under 100%.

Triangles signal continuation so this is another clear indicator that is not done yet. The next move up should be big so it will be a costly mistake to consider this the end of the bull market.

Note

It is looking like we are at the end of the (4) correction that started on July 17th. is consolidating near an area of high support, just shy of the 0.382 retracement of (3), ($536.50) and the June 11th/12th gap at $573. The price has now decreased by 4.77% from $565 on July 16th.

Since I consider (1) to be extended, I would expect waves (2) and (4) to have similar characteristics. On the 4h chart, wave (2) lasted 23 bars, or 15.5 days and had a 5.8% reduction from the most recent high. Thus far, (4) has spanned 18 bars/13 days and dropped 4.77% as previously mentioned.

This could point to the possibility of longer sideways movement or the price going lower before (5) begins. Parabolic SAR is signaling support so if the price drops but does not close below $537, it would make sense to go long.

Staying on the 4h chart, the price is currently at the bottom of a channel that started on April 19th. Volume has been decreasing for the last 5 bars and as you can see on the volume profile - there is a huge wall of support inside of the blue box from $524 to $536. With FOMC on Wednesday July 31st, bears are going to have a difficult time getting the price much lower.

Additionally, the peak of wave (1) was at $524.50, so with respect to the guidelines, wave (4) cannot enter its territory without invalidating the wave count.

For these reasons, I plan on buying calls as soon as a good buying opportunity presents itself.

I am setting my entry target at $535.75. On the 6h extended hours chart, this point is significant for the following reasons:

• 1.764 extension of A of (4)
• 200 SMA is rising and crossing this level
• Fills the $537 gap
• Large buying pressure on Volume Profile
• 5.18% decrease from $565 - closer to the depth of (2).

A move to $535.75 would be a 1.50% drop from the July 29th after hours close at $543.41. Overnight futures movement is looking bearish, so we could either see a sharp drop today or a more gradual decline heading into the Fed’s rate decision.

The price could go lower, and one thing I do not like about this wave count is that (4) is going to end up with 5 subwaves in a zig zag pattern. Despite this issue, I have noticed the subwaves do not have motive structure based on Fib ratios, so I do not think it is correct to consider this the early stages of a bear market.

Lastly, to support these points, I’m also monitoring VIX. Last candle for July 29th on the 1h chart is pointing to more volatility.

On the daily chart, it looks like the price is preparing to move towards the resistance around $20-$21. The False Breakout indicator gave a signal for another push to this level when the price started to decline in April. There is Bollinger Band divergence, so I think the VIX bulls are losing momentum, but that does not rule out one last 20% spike. With a major news event on Wednesday, I think we could see it get there and signal a great buying opportunity for SPY.

Note

Scalped a put at $543 at the end of the day and was able to sell after the bell for a nice profit on the initial drop. The dip was bought and the price failed to make a lower low after hours. Futures are holding steady overnight as well. I still think there will be volatility today that will move lower. Moving averages are showing momentum to the downside in the short term.

Just so you know what you’re looking at, my moving averages are the following:

• 50 SMA (Blue)
• 100 SMA (Yellow)
• 200 SMA (Green)
• 13 ALMA (White)
• 13 HMA (Pink)
• 13 VWMA (Orange)

In post-market, the price retraced close to 50% of the previous candle and stopped just below the VWMA.

It looks like we’re getting close to a reversal though. There is oscillator divergence on the 6h extended hours chart. We could see the price make a lower low today and SMI printing a higher low.

My prediction for FOMC is that the fed will keep rates unchanged, as expected, but may hint at a cut at the next meeting in September. This could energize the market into a reversal that will lead to new ATHs and the price reaching $600.

Since we’re getting close to the fed cutting rates, I think it’s worth noting that the market typically does not respond well to rate cuts. As we prepare for the last move up, it is a good time to start looking for signs of the market topping and potentially entering a bear market in the coming weeks.

The federal funds rate will likely receive its first cut at the September 17th-18th meeting.

Note

I am now considering this to be a longer correction. Made a couple good short trades and will be looking to reenter puts for the next drop. Yesterday we saw a maximum decline of 2.75% before the price recovered and bounced to $543.05 to bring the day’s close to -1.42%.

Since the last move up happened in three subwaves, I am calling it Minor B of (4). B volume was 55% of A and quickly sold off after touching the 0.618 retracement (0.382 extension; $554) of A.

Yesterday was likely wave (i) of C. At the end of the day, the price hit a support zone and will now be heading towards the 0.618 retracement. This level is where the red RMI line is sitting and beneath a wall of selling pressure.

If we gap up tomorrow, I will wait to buy puts for the next leg down. If the price is around yesterday’s close I will buy calls. Below yesterday’s close I will look at premarket factors before deciding which side to take, but I lean towards there being a bounce.

In the broader scope, to consider this the start of wave C, it would imply that the final leg down of (4) will be similar in length to A. Since A was a 5% decline, C should unfold in 5 waves and drop around the same amount. This would make the target of C around $526 - $530.

The issue I have with this is it would take the price down to the 100-day SMA at the 50% retracement level, which is not a true Fibonacci level. As I mentioned in my last post, the blue box is an area of strong support, so I do not expect the price to stay inside for long before reversing into wave (5).

(4) retracing 50% to $530 does not break any rules but it does go against the guideline that (4) typically retraces no more than 0.382 of (3). As long as the price stays above the peak of (1), $525, the continuing bull market argument is still valid.

What is interesting about this level, however, is that if we can expect (5) to have near equality with (3) and the price completes its retracement to the 50% ($530) level, the next impulse should be around 14% (but must be less so (3) is not the shortest).

A 13.35% rise from $530 would take the price to the 1.618 ($595) extension of (1), so $600 is still in play until this idea is invalidated.

I appreciate all the new follows and people who have liked this post. There have been some errors along the way but this is all still a learning process for me. I think I’m getting a better read on the market so if this logic holds true, I hope to have a profitable remainder of the year. Good luck to all.

ap769

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