Yesterday the S&P did appear to be settling in at the 38% retracement. And there was even a nice pop right after the cash close as if to say that the smart money was recognizing this and was positioning for a reversal today.
Well, the S&P rolled over significantly in the dark of night yet again, and it now appears that the 1307-1310 cash level, mentioned yesterday on Twitter, will be the one to watch. I opened a small position yesterday using SPY 133 calls and that level is where I'll have to make a decision whether to be in or out.
Today I will get bigger in this call position and will trade against it by shorting ES futures, just like last Thursday but in reverse. I did not hedge at last night's pop in the ES and of course I wish I had.
1298.66, the 6/22 high, is where the game changes for me. Note this is Interactive Brokers data, and you may show something slightly different. (IB is not known for the the precision of their charting.) If the S&P cash gets below the 6/22 highs, it would be an overlap and would thus remove the impulsive structure to the advance and would signal to me to consider other patterns.
I'm well aware that the US dollar has now exceeded 76.50 in a material way. While it may correct for a bit, a stronger dollar has been part of my overall thesis for many moons. Bit by bit, this thesis is getting stronger. I may shift my strategy soon and begin to align with it rather than trade against it. Specifically, that would mean being short in anything that is inversely correlated to the US dollar.
I'm trying these bolded levels today to see if they're easier to pick out.
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