"B" Wave Bounce Trade

As we wrote in last weekend's update:  "My view is that we are inching close to some kind of volatility event and a reset lower in price.. until then this slow motion grind will continue.. but few weeks worth of the uptrend can be wiped out whenever the event hits. Regardless, we have no short signal yet so we continue to hold long term longs and just be alert to the possibility of an exit very soon. Whenever the sell signal triggers, long term positions will be exited and trading shorts will be initiated."

What actually happened is we got the volatility event and reset lower in price as forecasted. We shorted the top, covered near the lows, and also went long with leverage near the lows on Thursday.

As for this week, options data is bullish on review today. Internals are neutral to bearish. Price action is short term bullish, medium term neutral and long term bullish.

Our odds indicator went to a buy on Thursday morning last week pushing us into an A-Class long trade after exiting shorts. We continue to hold this for now. All other internal indicators are either on sell or flat. Some of these are likely to go to a buy tomorrow. The Odds indicator still considers this as a ‘bounce’ trade meaning it is likely to be ‘b’ wave bounce. But this does not mean we cannot retest near the all-time highs. For now, no need to overthink this -- we will continue to hold our long trade until we get an exit or a sell signal. I see a good chance that either of these can happen in the coming week before a bigger sell off into next month. This also seems to be what the options/razz is suggesting. 

On price, we have resistance just above at 4443/50 levels on the Emini S&P 500. And support in the 4420/10 area. If we can clear 4450, we should retest ATHs next. A break of 4410 is the first warning that the bounce/move higher is done… Until this happens, there is a decent chance that ATHs or very close can be retested…

Grey zone resistance at 4442-4451 and then at 4469-77. Support is at 4419-10, 4379-71, 4353-43, 4326-17 and then at 4295/90 area. 

For Monday, daily pivot is at 4416.5.  Resistance R1 is at 4461.5 and R2 at 4485.5. Support S1 is at 4393 and S2 at 4348.

All the best to your trading week ahead.

Princely Mathew hosts The Smart Money premium service at ElliottWaveTrader.