Either SPX or Nasdaq is Lying

We have a big divergence in the relative signal areas of SPX and Nasdaq. Using simple trend rules SPX flags itself as a strong buy and Nasdaq flags itself as a strong sell.

One of these is probably going to be lying, and there’s probably a boatload of money to be made working out which one.

I favour the Nasdaq and I’ll explain the case for that in this post, but I’ll also briefly cover the ways we’d make money in the event of a bullish indices break.

To be honest, I’d love the bull move. I’m thinking if that came it could just be a case of get long and wait 3-5 weeks and bank massive profits. It’d be easy money and it may set up all the better trade after it. I’d like to be bullish - but I do not expect the market to cater to what I like.

Looking at SPX, it’s impossible using most (Not all) of the things I recurringly use to support a bear move. Very easy to support a bull move. There’s one thing that’s been gnawing at me, though, and it’s the way SPX and Nasdaq made their respective tops the last time.

Nasdaq could not have been simpler and SPX had no clear defined topping pattern as per the norms I use. The only reason I got the trade was Nasdaq was telling us something else might be happening. And it’s staggering how similar these are right now.

Here’s the SPX high.

Here’s the current chart.

Both show a strong series of drops and spikes and then one of the spikes turns into an insane pay off.

Here are these charts next to each other.

These look very similar.

While this was happening, Nasdaq was making a textbook two leg bull trap to the 76.

These situation really could not be much more similar.

In that setup, the best play was to switch to primary focus on the Nasdaq for the short and after the Nasdaq short started to work the SPX short became a lot easier.

The less stress trades were in the Nasdaq. The highest RR ones were in fading the SPX spikes (But it wasn’t easy).

Today the Nasdaq is threatening to go through 61.

This gives us all the phases we need to extrapolate the full Elliot wave bear plan if the break is made. In the event of bearish moves, this will be the primary trade plan for a while. If the Nasdaq Elliot waves play out on this bigger chart like they did in the first drop - we’re heading into the most lucrative swing for bears.

To briefly cover the Nasdaq catchup trade. One could attempt to buy at the 61, 50 and even 38 fibs if you’re determined enough to look for the Nasdaq knife catch, or they could go long a breakout of 76/86 and target a new high. A great example of a catchup trade was the RUT spike late into the week on the failed butterfly.

Nasdaq Elliot wave plan coming. Just giving it a little time to see what happens at the 61 fib.