Come Monday, we’re due to begin the “meat” of earnings season after a week with a massive switch of directions within this 6-week long decline pattern since the MAR 1 highs. Last week’s “switch” which really showed its face on Tuesday came on some double talk, down talk, and threats from Agent Orange, aka POTUS, and took Thursday’s PUTS trades into multiple triple-digit gains and ended us right above the 23.6% retracement level on SPX.
When a correction unfolds for this long, six weeks, before being confirmed, it is usually near its end, and with the BULK of earnings season still 1-2 weeks away, we could be looking at a pattern very similar to last year this time. We began the first two weeks of APR ’16 a bit slow/red, picked it up into the APR 20 high, and then took out that high 6 weeks later in JUN before the big BREXIT event.
As of Thursday’s close, we’ve corrected -3% from the MAR 1 highs:
SPX Big Picture
The correction looks like it is unfolding in a double three: abc-x-abc, or simply Minute a, Minute b, and Minute c. Starting from the MAR 1 high, 2400.98, Minute a unfolded in three waves bottoming at SPX 2322. Minute b rallied in three waves to SPX 2378. Minute c is already unfolding in three waves and has hit SPX 2329 as of Thursday.
If in fact Minute c = Minute a, then what we should be expecting to see is a low around SPX 2300. If Minute c extends, SPX 2260 = 1.50 Minute a; SPX 2250 = 1.62 Minute a.
Fibonacci supports are at SPX 2280 = 38.2%; SPX 2243 = 50.0% retracement. There is still pivot support at the 2286 and 2270 pivots.
Combining all these parameters, the SPX 2270 and 2286 pivot ranges appear to be the most likely support area and spot to really begin to get embedded in some strong LONG positions.
For now though, support remains at the SPX 2321 and 2286 pivots with resistance at the 2336 and 2385 pivots.
Note that the 1st round of the French Elections are due to be held on APR 23 (next Sunday) with Marine Le Pen the headliner who would, essentially, call for France to #FRUCKOFF and FREXIT the EU. Should no candidate win a majority, a run-off election between the top two candidates will be held on MAY 7. The Constitutional Council will verify the results of the first round on APR 24–26 and officially certify the vote tallies on APR 26; should a second round be held on MAY 7, the same procedure will be used again.
The new President of the French Republic will be proclaimed on MAY 11 and undergo their investiture ceremony on MAY 14 at the latest.
My Monday Trade Plan
Sit on my hands (for now). I will be watching the VIX for that 16 – 15 market direction change indicator, as well as GLD. It’s too early to try and decipher the coin-flip direction of the market for me to act ahead of it other than buying JUN SPY 237-238 CALLS.
We have JBHT, NFLX & UAL reporting Monday; BAC, GS, IBM, JNJ, UNH reporting Tuesday. By then, we should have some clarity, but what I really want to see is for SPY to take out a previous week’s HIGH above 235.50 before getting into any “last two weeks of APRIL is gonna rock” SPY CALLS.
SPX “Big Picture” Chart
SPX Downward Channel