Pekelo explains the sell off

[Buy1Sell2]

I thought I would explain yesterday's action, because on TV the "experts" looked all confused and out of ideas.

When there is a big market change specially one starting with a sell ooff most of the time it takes time to turn around again. There is a V recovery, what is just like the name suggest down sharp and up with the same angle sharpness. That is usually intraday when some fake news scared the market and once its nature of truthiness is realized, the market quickly recovers.

But most sell offs not like that. They usually put in a double bottom, thus I was expecting the second leg to fall. Sure enough we reached the 2 days earlier lows. This was one reason for the drop.

The second reason is the overstretched string effect. Once it was let go 6 days ago, it swang in one direction down for 4 days, then up for 1 day then down again with wild volatility. Just like the spring eventually, this wild up and downs will come to a much smaller resonancy. 2 rules:

1. We usually have a 50% retrace. The initial drop was about 340 ES points, and the math gives as 2530 (Sunday night low) + 340/2 = 2700 as a target. The swing back from the lows topped out at 2727 I think, so about 55% of the whole move.

2. We usually visit the original low in the upcoming days. That is again 2530 ES, so no, it is not over. I expect a huge rally from the lower BB touch on the weekly charts, that is even lower, but still moving.

All in all, there was nothing unexpected about the drop of the second shoe.... Just look up any chart that show a bubble bursting and you will see the action what we are looking ahead. Bitcoin dropped from 20K to 12K, then rallied back to 17K just to melt down later on. I am not saying we will have similar melt down, but the action and volatility will be the same.

Quick point of order--- Cash rules futures. As such, cash has already made a second low. I am long----I await my profits.

 

[Buy1Sell2]

Looking for a close today of 2758

 

[Pekelo]

Quick point of order--- Cash rules futures. As such, cash has already made a second low. I am long----I await my profits.

I didn't say it is going to happen today or right away. But generally that is how it goes. I agree with your view or relief rally, but usually people use it to get out of positions in the red now, and eventually the market turns again.

The cash lower BB on the weekly is at 2450 or so, just to scare you...

 

[Buy1Sell2]

I didn't say it is going to happen today or right away. But generally that is how it goes. I agree with your view or relief rally, but usually people use it to get out of positions in the red now, and eventually the market turns again.

Certainly---in a downmarket. If this is a downmarket then that will happen. If it's not, then the market will carve out a new intermediate bottom and move to new highs. ---Just like what it did at 1800.

 

[RRY16]

I can’t (and won’t).
But the point is that my charts alerted me to the VIX moving up while stocks were going sideways to up. This is what was my key.
I wish I traded it better than I did!

Better? What happened?

 

[Pekelo]

Certainly---in a downmarket.

Actually, this market can go sideways for the rest of the year, fluctuating between 2500-2800. After all such a huge run up requires a breather, and in the last 2 years there hasn't been any.

 

[Pekelo]

Here is another one explaining today's actions: Yesterday's support became today's resistance:

 

[SunTrader]

Day late. Today was 2nd test:

 

[LacesOut]

Don't you need to post this in real time to gain credibilty for your analysis?.

Yes of course.
But I generally don’t trade equity indicies. It was a simple anomaly I spotted on the VIX and I bought an ATM put on Friday afternoon near the close.
Market was down nicely on Monday and I took my profit.
I was a pussy.
If I had held 4 more days and trusted my analysis I would have made 10X the profit.

I’m not posting charts or my methods on a public board. I just don’t do that.

 

[Pekelo]

I was a pussy.

So was I.

After 2 years of relentless rallying and not having a bigger than 120 points pullback, (not to mention trying to call tops in 2017) I am not going to predict a 300 points drop. But when I saw the weekly chart going up 200 points in a month, I thought, "this shit has to come down."