Ladies/Gentleman, we are going down to 1044, theres no two ways about it. No debate, no ifs, ands or buts. I posted the bearish crab chart on here like 3 times last week, we had to get above 1108 to make the CD extension long enough to question the pattern's validity. For anyone not familiar with this pattern, its a harmonic pattern, sort of in the "Gartley Family" of patterns if that makes sense. But it just uses different fib levels than a gartley, and more noticeably, doesn't contain an AB=CD corrective wave. Instead, the final leg up, which will fool alot of longs into thinking a new uptrend has started, will extend/project to abnormally long levels after a fast AB/BC two wave retracement of XA. The long CD leg can project 1.618 of BC on the short side, or as long as 3.618. Also, the final point D, like with a butterfly pattern, will be between a 1.27 and 1.618 projection of the XA leg that started the pattern out. I'm not on my computer, but I'll look back for the last thread I posted the chart in an repost it here. Note, it wont be updated but it will show you what I'm talking about.
Note, the pattern can complete and reverse after a .618 retracement of the final CD leg. On the S&P, thats around 1044. However, anyone else that trades butterflies, bats and other harmonics like the crab will know that a huge over-extended CD leg like the one we just had, 1044-1099, typically ends much more violently (and much more profitably if you're trading in at point D) around the 1.27 projection of the patterns A-D move. Again, no chart in front of me, but as I recall, that move was from 1010.91 to 1099.46 or so. So you're looking at a 1.27 projection of a 90+ point move down from 1099.46 (D). 1099-1010 is about 89 points, times 1.27 gives you 113 points. 1099 - 113 would brand new selloff low around 987-990.
Barring a game changing fundamental change, ie news from Fed/administration over the weekend, which I STRONGLY doubt, you're going to lose money being long ahead of those two points, 1044 and 987. As I said when I said not to underestimate this ole crab, dont say you weren't warned in advance
I did not add to shorts at this weeks' highs, too many whipsaws every day for this trader. I've been keeping it to small options day trades, and a handful of shorts I've had open as longer term trades. But I did open up huge positions in QQQQ puts and SPY puts today, but underneath approx. August 105s on the SPY, these were trading about $2.20 when I got in, they'd be worth a minimum of $8-9 if the market trades below 1000. On the QQQQs, I opened calls in Sept. 43 puts for around $1.35 each. The QQQQs would (the etf itself) probably trade to like $42.50/$42.75 by the time the SPX hits 1044, perhaps even lower depending on how some tech earnings go next week. Keep in mind those are September puts and I'm talking about a move that might happen in July still. THought those were fairly valued considering the downside potential.
everyone be careful out there...i did find a more recent chart ,attached is the crab on the QQQQs
Edited by Jhoe, 16 July 2010 - 03:47 PM.
