The collision of global markets and social mood

Friday, January 18, 2013

Fibonacci At Work

Another double bottom in overnight futures. Another potential falling wedge. Below ES 1474.25 would put the pressure on.

Asia must've liked what it saw in the US yesterday. Nikkei, Hang Seng, and Shanghai are up 2.86, 1.12, 1.41% respectively.

I doubt THE highs are in, but there may begin a period of volatility caused by some larger gyrations. The S&P was up .56% yesterday, while the VIX was up 1.12%.

I got out of SPY 147 calls early yesterday and characteristically left money on the table. The point is I stuck to my plan.

The chart below shows two Fibonacci extension targets I was watching. The market flirted with the first one in the morning as if it knew it was there (not seen on this chart), so it was a hint that it might recognize the upper one should it get there. The result is pretty cool so far.

I bought some SPY 148 puts there and scaled some at the close. It might take a few tries to get it right, but a simple retracement back to the 38% level of the move from the 12/31 lows would target 1450. I'd look at being long there. I'd like to get both sides of this market in a bigger way since missing an ideal opportunity the Friday I was away snowmobiling.

I'm becoming more and more convinced that a megaphone top could be in play. At least it would explain how the market could hold up so long and look so bad internally, especially since the 2009 lows. If this scenario plays out, it would mean that we've been in a corrective process since 2000, which would have been the true top in the market. Everything since would actually be a complex bear market, which is why so many technicians scratch their heads. It would resolve with a test of the upper trend line around 1600 and then a scary trip to the lower trend line, most likely targeting the 1995 tech breakout at roughly 500.

Who knows what would happen afterwards, but it would be very interesting to find out.

No comments:

Post a Comment