Originally Posted by Vanity
One of the possible alternatives was a retracement of the entire decline from May 1st before crashing after (just like last year). I weighted this to be the less probable scenario after the large reversal from the Spanish bailout failure.
We have a 0.5 retracement level at 1341 that is within a stones throw right now. In the futures market on Monday we smashed through that on bailout hopes for Spain, reached 1346, then it reversed hard. Perhaps right now the equity markets are back testing this resistance level, and we sell off today and begin selling off next week. Theoretically, we could stop right here at the 0.5 level, since futures markets did that already.
The big drop down to 1265-1215 isn't off the table, that is definitely going to happen (look at the June rally upwards, compared to market internals. They are diverging, and market internals and breadth are deteriorating). What is important now is figuring out whether we top out here at 0.5 retracement (1341) or make a push higher to 0.618 (1358) or even the whole thing (but no new top).
I'm out of my shorts at the moment and just day trading dips here and there. What about your thoughts? As for the inverse H&S, I've also noticed a H&S develop on VIX. Which would favor more upside. But then treasuries are saying this rally is false. Time will tell. Waters are murky.
The waters are very murky indeed, everything for the most part is at crucial points. This should be a very interesting few weeks. I opened up a position of a few put options on BAC as it is approaching its 50 DMA on the daily chart and also approaching the upper limit of its channel. Lets see what happens from here