I'd like to make a couple of comments - one short term, and another long term - in relation to your charts.
It is possible that the rally of the past couple of weeks is only Wave 4 of an evolving down impulse since the May top. In this case, we may see (what you called) a quick additional new low, before a more substantial rally takes place. For that, I think, the index (SPX) would need to begin another decline pretty soon. It is possible that the rally of the past couple of weeks was an ABC up. The "C" would be relatively small, but that happens. Another example would be March of 2007, when the sharp decline ended with a quick, small "C" retest of the lows.
In that case, the reversal from the (new) lows would be interesting to play from the long side.... and the end of that rally would need to be shorted. Of course, if your preferred view is in play, we are ALREADY in that 2 of 3.
In the long term, I think it is important to be "immunized" to the possibility that the larger decline (which started last October) may take a complicated form - like maybe an Ending Diagonal. That may prove hard to play, since it would imply dealing with choppy, confusing overlaps. Such a structure may take a good few years to unfold.... much longer than a "regular"impulse would. |
