As I was checking the charts and gathering my thoughts before posting, I noticed a dove high in a tree near my window. I had the distinct impression that the dove was looking at me.
I went on with my work until I noticed something move right outside the window. It was the dove. It had crawled out on a small branch and was peeking inside the window. It looked me square in the eye.
In the Native American world, this is called Animal medicine. I immediately searched for animal totems on the web to see if I could glean the meaning of it.
Messenger of Peace, love, joy and gentleness, prophecy of good things, maternity instincts, awakening to promise of future with clarity. Dove shows us how to walk between the physical and spiritual world.
Honestly, I didn't know what to make of it. Maybe it was too early. Instead I thought about it all day. It just sort of stayed there in the back of my mind.
I thought we were in a sell zone yesterday, so I spent most of the day trying to buy put options at the right place and the right time. I was in an out of them, and in and out of calls too. I was patient and took profits on a previous call purchase from last week that had a nice gain, and then wrestled with the market from then on.
At the end to the day, I was long puts yet again and had a slight gain which I then hedged with some calls. What I thought was going to be the final top only broke down a little bit before it stopped in its tracks. It didn't feel right, and suddenly I thought of the dove. I had a slight gain on both sides of the trade, not much, but it was slightly ahead. I guess my sixth sense kicked in and I noticed my feelings. I felt like I was fighting the market too much. It would likely go higher before it went lower. I took off both sides, made a few cents and walked away from the trade.
It wasn't until the aftermarket that I figured out what the dove was trying to get me to do. Take a look at what happened next.
The horizontal line is where the daytime session closed. In the aftermarket, the futures spiked.
It is said that there are no accidents in life, that things happen for a reason. The universe is always communicating with us in many different ways. Many times it does so through the animal world. In this case, perhaps the dove was reminding me just to feel my feelings. I was very glad I listened!
So, back to the markets. What did this up spike mean? Or more importantly, what did it accomplish?
I think it simply completed the pattern that we've been observing here for the last few days. If you notice below, the S&P reached the upper trend line yesterday.
By yesterday's close, the S&P futures had not. The up spike brought the futures into agreement with the cash index. It has sold off ever since as if to say "mission accomplished."
Also note that a bit of Fibonacci magic has occurred as well. I've shown a fib grid on the chart above. Notice that the futures hit the highest horizontal line which represents a 127% Fibonacci expansion which often acts as the final target of a move.
Price has now traded out a 3-wave move from the lows, which is a corrective pattern suggesting a return to the lows. It is something that very few people expect.
So today will be a key day in the market. We'll see whether this megaphone pattern is for real, or whether the market has other ideas. And you can bet I'll be listening carefully.
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