I think it was @Launched who posted a chart on the other thread...

I think it was @Launched who posted a chart on the other thread and he used the bottom of the candle bodies to highlight the bottom of the trend line. Thinking through that process, I have provided an alternative to the chart you posted.

If the market was strong, then the body of candles should be supported throughout. As such, we have already had a break of the strong trend support and went into the lower trend line based upon the lows. I would consider this a buffer area and therefore with the break last night a confirmed downtrend to occur. No bounce to be expected from here on in.

In addition, is this now forming an ABC pattern with the present targets of the June lows around the start of October. If June levels are held then we might have another bounce and the possibility of trading another push (not sure if this would last 3 months like the last one and depending on the strength of the push). If not then we should expect a massive drop as highlighted by all the public doomsayers comparing to 2008 and other years overlaying those charts with the present ones.

The problem is that having that knowledge out there, those who control the market direction could implement one of three possible situations.
1) Bounce prior to the June lows as drawn and lead into a possible short term relief rally again.
2) Break June lows and then watch the shorts pile on and then reverse the markets with a massive cover bounce.
3) Let the markets plummet.

I will consider option 3 at present mostly based upon the historic net amount of puts that have been bought by the instos as posted by others here. Depending on the timeframe of their expiry would signal a significant move prior to this date along with the in the money target levels. Just not enough information to determine these details without much personal leg work.

The last major move down took 3 weeks before a consistent recovery. If the Puts are dated with enough time to expiry, then a cover bounce would be the second alternative with a very short time frame (strong recovery and strong drop once again). This would allow enough time to gain as much drop value before the time value of money reduces significantly.

Follow the big (smart) money.



#SP500 #USAnalysis