My contrarian senses are starting to tingle and I see a lot more value now in shorting the currently extended moves. In this post we’ll get more actionable on ways we can fade the current momentum, reasons why we might have value doing so and also the conditions under which we want to “Nope out” of the shorts and revert to long.
We’ll do this post in two or three sections - it would take a long time to write up full plans as one section and during that time the entry area may be missed. So here’s part one.
Firstly, let’s just do a basic entry signal. Why can we support a short right now? What gives it a possible edge?
using the basic ebb and flow of Elliot wave on the SPX we have formed 5 waves up, spiked out the high and on the smaller charts have a W like formation (Harmonic). Even in a net bullish setup, this could setup a bigger correction. This gives us a lot of scope to short here and get stops into even to freeroll the support break.
In my chart above the red lines above 4/under 5 are my long stops. I’m out longs on a break of structure and also have shorts at 4230.
If the bulls are business as usual, we’d typically see a strong rally out of the correction. We can define our retracement levels for that now and be ready to act upon it if it comes.
Wave 5 should extend 161 of wave 4 and upon breaking wave 4 a mini crash tends to come. We’re now testing this break off the 161.
So we’ll send out part one now and get started on part two, a wider swing analysis.
Stop on this setup would be 4237 with an entry 4227.