SPX / ES - Bull Whips and Bear Saws
Updated
Human beings, especially retail traders, can only really handle themselves in trending markets. Many people, especially the old men, have grown used to mashing buy on blue chip equities or the indexes no stop, and watching it go up every day no matter what.
"Bought the top? Who cares? Made 3% this week!"
Unfortunately, that money printer tractor pull is no longer in operation until certain critical downside conditions have been cleared.
Because there is so much at risk, and so much to gain, in trading, there is a lot of emotion. Fear and greed predominate, and it's extremely challenging to cultivate these hearts, these attachments away, becoming cool, empty, and most importantly - rational.
Algorithms, on the other hand, love ranging markets. They love seek and destroy patterns. It's easy for them, because they're fast, can process large amounts of data, are equipped with unbelievable liquidity, and are really just playing a game.
In my opinion, this coming week is going to have a tremendous amount of action as the setup for the descent to June lows begins.
It's important to zoom out. Looking at the monthly, August's run above the May highs and the subsequent dumpster close is a case for literally anything _except_ for a continued bull run or ascent towards 5,000 happening.
Most importantly, we still have a long way we can fall before we get to previous lows.
The situation is shown to be more critical when examining the weekly. Long red candles abound, and if the July pivot is taken out, it can be confirmed that the next area sought will be numbers like 3,500 and below.
Looking at SPX on the daily, it's important to recognize that a daily July pivot has already been taken out, already bounced, and was taken out again during Friday's NFP slaughterhouse.
The various indexes and some other critical components and critical equities all trade in different patterns, but with similar or identical manifestations, occurring at different times. Everything is happening based on an order. It's not chaotic, not random, and not participant driven.
Instead, price action is what drives participants.
For example, based on Friday's post-market recovery of the NYSE closing dump, one is given the impression that 3,9xx has support and will not be broken. However, several different elements in other tickers all indicate that a run on 3,800 is all but inevitable.
There's also unfinished business above two sets of equal highs that have been left, that also correspond to the critical psychological 4,0xx and 4,1xx levels.
It's extremely notable that printing 4,0xx and 4,1xx doesn't equate whatsoever to a renewed bull run. In fact, quite the contrary.
The major ETFs that correspond to SPX and Nasdaq all have options that settle each week on Monday, Wednesday, and Friday. With markets closed because of Labor Day, the Monday option will settle on Tuesday, followed the next day by the same thing. This leaves many opportunities for rife manipulation and deft handling.
The most important day of the week is Thursday, when Federal Reserve Chairman Jerome Powell speaks. Powell and the Fed are notorious double talkers. Unlike other central banks, like Japan, who tend to be clockwork-credible, the Fed will say anything as it openly manipulates global markets.
Bear in mind that it was only a few days ago that Powell's 8 minute nothing speech in front of a wood panel wall at Jackson Hole sent the end of August into the sluice ditch.
I believe that the most likely situation to manifest this week is an early run into the 3,8xx range following Monday's PMI data. This will encourage a lot of people to panic sell, to go short, and buy puts.
Then, I believe we will quickly rip back into 3,900 and various factors will lead to a revisitation of the unfinished business at 4,0xx and 4,1xx before the week is out.
You might think it's too much volatility, but we're really looking at a meager ~7% weekly dealing range, just in a seek and destroy pattern.
This type of behavior gives everyone the opportunity to sell low, buy back high, and then get savagely guillotined for Thursday and Friday. The rest of September and much of October will then likely be a total abattoir, because we will revisit the pre-COVID highs, and it is going to come fast.
You can set your watch to it.
Perhaps we really will see 72 VIX print:
VIX - 9x8 = 72
So, how do you handle it? Low risk and cash heavy. You should have been out of equities when SPX and Nasdaq were revisiting April highs during an obvious onset 21st Century Great Depression. But if you aren't, maybe you'll get a chance to get out this week.
But in reality, what really happens to most people is they see it rip and don't want to miss the boat to the 4,500 moon. After all the cheap champagne wears off, one finds themselves clinging to a piece of wood in the middle of frozen water, praying to Heaven.
And yet, although Heaven sees and observes all, the Gods never speak.
Be careful, friends. Dark days lie ahead for humanity. The only way to make it through is to face it, and yourself, head on. Work on improving your heart and your virtue, do better with the things you have done poorly with in your personal life, and things may work out all right.
"Bought the top? Who cares? Made 3% this week!"
Unfortunately, that money printer tractor pull is no longer in operation until certain critical downside conditions have been cleared.
Because there is so much at risk, and so much to gain, in trading, there is a lot of emotion. Fear and greed predominate, and it's extremely challenging to cultivate these hearts, these attachments away, becoming cool, empty, and most importantly - rational.
Algorithms, on the other hand, love ranging markets. They love seek and destroy patterns. It's easy for them, because they're fast, can process large amounts of data, are equipped with unbelievable liquidity, and are really just playing a game.
In my opinion, this coming week is going to have a tremendous amount of action as the setup for the descent to June lows begins.
It's important to zoom out. Looking at the monthly, August's run above the May highs and the subsequent dumpster close is a case for literally anything _except_ for a continued bull run or ascent towards 5,000 happening.
Most importantly, we still have a long way we can fall before we get to previous lows.
The situation is shown to be more critical when examining the weekly. Long red candles abound, and if the July pivot is taken out, it can be confirmed that the next area sought will be numbers like 3,500 and below.
Looking at SPX on the daily, it's important to recognize that a daily July pivot has already been taken out, already bounced, and was taken out again during Friday's NFP slaughterhouse.
The various indexes and some other critical components and critical equities all trade in different patterns, but with similar or identical manifestations, occurring at different times. Everything is happening based on an order. It's not chaotic, not random, and not participant driven.
Instead, price action is what drives participants.
For example, based on Friday's post-market recovery of the NYSE closing dump, one is given the impression that 3,9xx has support and will not be broken. However, several different elements in other tickers all indicate that a run on 3,800 is all but inevitable.
There's also unfinished business above two sets of equal highs that have been left, that also correspond to the critical psychological 4,0xx and 4,1xx levels.
It's extremely notable that printing 4,0xx and 4,1xx doesn't equate whatsoever to a renewed bull run. In fact, quite the contrary.
The major ETFs that correspond to SPX and Nasdaq all have options that settle each week on Monday, Wednesday, and Friday. With markets closed because of Labor Day, the Monday option will settle on Tuesday, followed the next day by the same thing. This leaves many opportunities for rife manipulation and deft handling.
The most important day of the week is Thursday, when Federal Reserve Chairman Jerome Powell speaks. Powell and the Fed are notorious double talkers. Unlike other central banks, like Japan, who tend to be clockwork-credible, the Fed will say anything as it openly manipulates global markets.
Bear in mind that it was only a few days ago that Powell's 8 minute nothing speech in front of a wood panel wall at Jackson Hole sent the end of August into the sluice ditch.
I believe that the most likely situation to manifest this week is an early run into the 3,8xx range following Monday's PMI data. This will encourage a lot of people to panic sell, to go short, and buy puts.
Then, I believe we will quickly rip back into 3,900 and various factors will lead to a revisitation of the unfinished business at 4,0xx and 4,1xx before the week is out.
You might think it's too much volatility, but we're really looking at a meager ~7% weekly dealing range, just in a seek and destroy pattern.
This type of behavior gives everyone the opportunity to sell low, buy back high, and then get savagely guillotined for Thursday and Friday. The rest of September and much of October will then likely be a total abattoir, because we will revisit the pre-COVID highs, and it is going to come fast.
You can set your watch to it.
Perhaps we really will see 72 VIX print:
VIX - 9x8 = 72
So, how do you handle it? Low risk and cash heavy. You should have been out of equities when SPX and Nasdaq were revisiting April highs during an obvious onset 21st Century Great Depression. But if you aren't, maybe you'll get a chance to get out this week.
But in reality, what really happens to most people is they see it rip and don't want to miss the boat to the 4,500 moon. After all the cheap champagne wears off, one finds themselves clinging to a piece of wood in the middle of frozen water, praying to Heaven.
And yet, although Heaven sees and observes all, the Gods never speak.
Be careful, friends. Dark days lie ahead for humanity. The only way to make it through is to face it, and yourself, head on. Work on improving your heart and your virtue, do better with the things you have done poorly with in your personal life, and things may work out all right.
Note
Sunday open with lots of fear in the air, while Monday is a truncated Labor Day session and NYSE is closed.Careful, now, bears.
Note
In the case for a 300 point bounce before we dump, WSJ says that overseas investors are dumping their money into equities since the USD is mooningwsj.com/articles/investors-are-pouring-into-u-s-stocks-to-avoid-greater-turbulence-overseas-11662421967
So, if you were the monsters on Wall Street, would you sell to them cheap, or sell to them high?
Note
Nice of the ES MMs to gun the 4,020 double top with a gap up on daily market open with the NYSE is closed.
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