Hi Matt - would you be able to share the chart link for this one please?

Stocks above 50 and above 200 did take out sep lows however. Fwiw.

ARKK, BTCC, Cloud and Cyber Security stocks have all still not broken their September lows.  Positive divergence??

Sentiment seems to have LOTS of room to fall before it gets extreme

Matt / Steve do know what day the new AAII surveys come out?  Is that over the weekend?

It's so weird seeing the entire CNBC panel so bearish.  None of them even blinked when Carter said target = low 2000s

https://www.youtube.com/watch?v=T0V334TtgNQ&ab_channel=CNBCTelevision

Do you think that we were just in micro wave 4 yesterday and this drop is wave 5?

If so then wave 2 can still happen (next happen).

Before that we do have a couple of gaps to close below (in the NDX)

I agree. Also looking for a 50 to 61.8% retrace here to open next tranche of shorts 

Looks like 5 micro waves of wave [1] are done.  If we get a big A-B-C like I have drawn out then the next wave [3] down will be epic!  
I think we move up in the form a small inverted head and shoulders. Kobie's favorite pattern ;-) 

The challenge is that you don't know when the wave three will end because they have a tendency to extend. You also want to let winners run a bit. So I typically wait for a wave four and then exit as soon as we pop into wave five. I don't milk the wave five at all. The other challenge is that sometimes we get a truncated wave five.  The best solution is to take profits as you go especially when wave three is extending. 

I agree Matt. The market has a fractal nature. Looking at past patterns help provide some guidance. It's simply one tool of many. It's not necessarily predictive but some help lay out possible road maps. 

I REALLY hope we get that wave 2 Steve. Would love to load up on some options! 

This island top looks really ominous.  Seems to be the perfect way for the market to start wave 3 down to new lows.

Just waiting on confirmation now.  Need to see if we get 5 micro waves down, followed corrective A-B-C , followed by the plunge to new lows 

Things look impulsive to the downside so far.  

she looks ready to break - good chart 

@tmbrook1, here is the example you requested

This is on QQQ.  First image is a normal Bear Put Spread, 2nd one adds a  385 Call which is just $0.21, so its dirt cheap insurance in case the market moves against me.  Even if the market goes up 10% my loss is almost zero.

But as you can see the insurance starts losing some juice after about a month, but its best practice to exit spreads early (at around 50% of max profit).

As an advanced tactic, if the market moves against you then you can sell that OTM call if you feel the market will come back in your favor thus banking some profit in the interim.

I agree. I think bears are really getting squeezed here.

I dont want the market to be flat so that I can exit the trade early.  I rarely hold to expiration.  I normally exit halfway through.  I end up making more on a per day basis that way.

You are right the ladder can happen naturally if you are opening trades on both sides, that's a cool approach.  But then one trade may be a loser.  However with an actual ladder each of the trades can be winners. 

Have you guys looked at Ladder credit spreads?  You are basically adding on one far OTM option to cover the possibility of a surprise move in the wrong direction.
By doing a ladder you can win no matter which direction the market moves ... all you need to bank on is the market moving at least 3 % up or down - a flat market is no good.

I do the same thing DigiNomad: use TA to lean in one direction while opening spreads.

I like to open credit spreads just because my downside risk is capped, plus I think the margin requirement is lower since I am taking on the credit.  I agree, its good to have a system where you can win in 3 of 4 scenarios, 80% of the time.

I open 2-3 month long spreads and usually close them out in about a month ... depending on where we are in the elliott wave counts.  I find its not worth holding all the way 

You can make more with spreads than with the indexes themselves 

Looks like SPX  wants to hit the .618 retrace
which would then surely lead to some kind of pullback
that pullback could be the major drop into wave 3 of three
or it would just be a B wave pullback followed by C up to close that gap at 4225 

Same here Steve. That resistance point is also the 38% retrace from the previous high. So lots of confluence above. And we have had no pull back from the lows yet. 

I am hoping this starts the big wave three of three down but I wonder if there might be a bit more chopping around.