Here we go again... more grinding higher. Friday was looking good for the bears briefly with that late day drop but the bulls reversed it all back up by the close. I don't see any clear setups forming yet for the bears so this bull can keep grinding for awhile I guess. Now that 2800 has be hit on the SPX and 26,000 on the DOW as well as 7500 on the Nasdaq I have to think the talking heads on TV will be out in full force bragging about it and telling everyone how bullish it is right now. For the bears to have any shot at a move back down the retail sheep must finally throw in the towel and become bulls. Once the finally go long the market a top will be in. Where that is at I wish I knew.

For now I'm just waiting patiently to see some kind of signs of capitulation from the bears. Until then no meaning pullback is likely to start. Hopefully they throw in the towel today and give up. However, it's more common that once a big "even number" level is hit there will be a move up into the 20's on it before a turn back down. Like 2820 or so on the SPX or 7520 on the Nasdaq. On the DOW it would be something like 26,200 or so. This isn't some rule written in stone but it's a common thing I've noticed that happens over the years. The other common thing would be to fall about 20 points shy, like the 2780's and 2880's for the SPX. You'll noticed we did a lot of chop in the 2780's recently before pushing through. So the next resistance is around the 2820's I believe. Have a great day.

Some small cracks in the market showed up yesterday but it still doesn't look ready to drop hard yet. Today it's probably going to play the ol' "pin game" to make the most options expire worthless. Since it's around the 278 SPY level right now before the open I'd have to guess that some where between 277.50 and 278.50 would be the pin spot for the close today. The market is very tricky at this point as if it goes sideways long enough it could actually work off enough of the overbought conditions to continue higher. Yeah, I know you bears don't want to here that but it's possible.

Ideally though we go up some more today to get closer (but not go into) that 2800 level on the SPX and the 26,000 level on the DOW. Both of those even numbers seem to be very tough resistance for the bulls right now. A final move up near them might just be the exhaustion point needed for a nice drop to start next week. It's still not an easy call here as every time you think it's ready to drop it fools you with some small pullback one day that get reversed back up the next day. Yesterday and this morning is a perfect example. Today will likely be boring as SkyNet holds the market in place all day with a bias to the upside... hopefully (if you want a good short at least).

I don't have anything else to add. We are at the spot and time period where a turn should happen. I've been expecting today or yesterday to be the top and so far it's looking like it will be on schedule. But a move down to put in another red close on the SPX and DOW would change that as it would be more consolidating by the bulls in an attempt to work off the overbought conditions.

I'll post more updates in the chatroom throughout the day if needed, but that's the forecast for today. A move up to just under 2800 and 26,000 with green closes would have a high odds short going into next week. Have a great weekend. P.S. If the bulls broke-through those resistance levels and closed above them today I would stand pat and not short as resistance could become support. I'd wait until next week to see if it was a fake out pierce through or if it holds.

Over night the SPY popped higher to 279.63 to hit and pierce the FP, but the futures are now back down below it now. So I don't know if a hit afterhours qualifies as being "fulfilled" or not? Maybe they run it up after the open again? Just don't know? It's 50/50 on whether or not the FP is "fulfilled" at this point. If so then we should start our first smaller wave 1 down today and back up on Friday for the wave 2 up... thus setting up next week for an ugly move down to start. I'll add more updates in the chatroom if needed but that's about all I have to add this morning.

Not much to add this morning. I don't expect any big movement in front of the 2pm FOMC today. Yesterday SkyNet teased us by rallying up close to the FP but not close enough to call it "fulfilled". Same thing on the downside "possible" FP as we rallied right after the open and did not hit it either. Tough call on whether it's a late fill or a real FP, but the upside one is real for sure. My guess is that it will be hit tomorrow. But whenever it's hit I think the top is "in" and the next big move down will start right afterwards. I'll end this update there as nothing more can really be added. Best of luck to us all.

Yesterdays pullback was small but might have been enough to complete a tiny wave 4 down and allow a tiny wave 5 up to end Minute Wave 5 up and all the waves up from the 12/26 low. I'm still not sure on that as we might have some surprise drop today out of nowhere to a slightly lower low, which then would end the tiny wave 4 down. On a 5 minute chart of the I can see an (abc) A down on the 13th from the opening high to around 11:30 am, then a B up into 3:30 pm that day, and a C down into yesterdays early morning low around 9:45 am. That ABC could (should) be enough to end the tiny wave 4 down.

If that's the case then we are in the tiny wave 5 up now and it should end today or next Tuesday I'd think (closed on the Monday). This tiny wave 5 will of course subdivide into even smaller waves as well. Normally it will have 5 waves inside it too, but trying to count all these super short waves is very tough... especially since I'm not an EW expert. I just like to add them to the mix with technical s I follow too, as while they aren't very accurate at future forecasting they do help when combined with many other methods of predicting the market.

The FOMC is next Wednesday and while it's just a rehash of the January meeting the market still acts choppy in front of it with the hope that Fed Chairman Powell will add something new to the comments from the old meeting. From what I've noticed in the past a top is put in either a few days in front of a meeting or a few days after one, but the week itself is full of choppy swings up and down that don't really go anywhere.

This is to make sure the Fed's don't get blamed for the market selling off after something they said I guess? They want to be the hero and not the Villain... LOL. This meeting is on the 3rd week of the month too, which is normally the most bullish week due to the monthly options expiration and the manipulation "pinning" the market makers do. So I still think a top is near and likely to appear next week, but that could change if we dropped today and Tuesday, and well as Wednesday going into the 2pm minutes reading of the old meeting.

I'm not expecting that to happen as it looks more likely that we'll go up into the FOMC but those guys are very sneaky and might have some new rabbit to pull out of their hat and spark another 100+ point SPX rally into the end of the month. I doubt it, but it's possible. My thoughts are that we top out today or next Tuesday and then start a series of wave 1's down and 2's up all of next week that just produce some lower high from early in the week to the end of it, but not some huge drop. The 4th week of the month is where I expect a nasty pullback to start.

Anyway, for today I don't have too much to add. Looks like it's opening up positive and still continuing to form that tiny wave 5 up. Should end today or early next week I'd think. Where? Don't know? Maybe it grinds up to 2800 or more? Or just stalls shy of it a few points? It's not so much about the point value for me as it is to just catch the end of the move so I can get positioned for the next turn (down is this coming case). Have a great day.

Ok gang, yesterday produced a nice move up, which others label as a wave 3 inside a Minute Wave 5 up. This morning we see some move continuation of that wave 3, which I discussed in the chatroom as possible. The only thing that would have made me think otherwise would have been if the wave 4 down would have happened midday and the wave 5 up back into the close. But that didn't happen as there was next to nothing for any pullbacks throughout the day. That "to me" put the odds about equal this morning of a gap up to continue the wave 3 or a gap down for the wave 4 to start. So I stayed in cash and didn't risk it as odds where just not favored for either scenario.

It's hard to time the end of a wave 3 and then successfully play the wave 4 as many times it will be a short lived one as trapped people in the wave 3 will want to exit on that wave 4 and those that missed the wave 3 will want to enter. For this reason I find wave 4's very risky to trade. But, with that said, wave 2's and wave 4's tend to do the opposite (as I discussed in the chatroom yesterday), whereas if you have a weak wave 2 (we did) the wave 4 will "usually" be strong... and the opposite is true if the wave 2 was strong the wave 4 would be weak.

This isn't written in stone as some guarantee as I've seen two weak waves happen as well, but I must say I don't recall seeing two strong ones? Anyway, it's just the mind of the traders that causes this opposite reaction. In this case, which is a bull move up, traders missed the tiny sideways pullback on Monday as being a wave 2 pullback where they could get long. And worst, some of them short it. Now those short are trapped from yesterdays wave 3 up and those that missed it want it.

So if the computer that runs the market (I call it SkyNet from the Terminator movies, which I nicknamed it that some 7,8 or 9 years ago) has enough trapped short it usually leads to a tiny wave 4 as well and then an exhaustion wave 5 up to end it all. But if too many bulls bought the wave 3 up and it overruns the bears shorting it SkyNet will want to shake them out... hence a stronger, deeper wave 4 pullback. It's our job as traders to "guess" on what it happening with the trapped shorts and new bulls. From looking at the hour to hour report (posted in my chatroom by a member) that shows the "calls" and "puts" being bought yesterday I have to point out that it was heavy on the call side.

This (to me) suggests we'll have a bigger wave 4 pullback to shake them out before a wave 5 up starts. And since the market is set to gap up again here at the open my "best guess" is that it will not hold past the 11:30 am EST close in Europe, and will start the wave 4 pullback at some point today. The best time for this pullback to start would be the open of course, as if the bears can't attack early while there is good volume it's not likely they will be able to push it down in the midday section when volume dries up. How far will this wave 4 down go? I don't know?

Again, it "should" be deeper then the tiny wave 2 down but that's NOT a guarantee as sometimes I've seen both waves be weak. However, if it's a decent pullback be aware that those trapped bears will likely flip to becoming bulls expecting another stronger wave up to follow. Plus those bulls that missed the start of the wave 3 up will go long on the wave 4 pullback expecting another strong move up too. This why you'll see many 5th waves fail and either double top or truncate short as they have too many bulls on board. Just keep that in mind if you decide to go long on this pullback coming today or tomorrow. Best of luck to you.

The futures are up nicely this morning in what appears to be part of a 5th wave, which should end the rally up from the 12/26 low when finished. It's still looking good for a top this week with Wednesday the most likely day and Thursday the second most likely day. If the move up from the low on Friday was a small wave 1 up then yesterdays pullback was the wave 2 down and today we are in the wave 3 up. So another small pullback for a wave 4 down and then one more thrust higher for the wave 5 up should complete this "Minute Wave 5" (credit goes to Tony Caldaro for the labeling of it).

Targets on the upside are obviously the prior high to make a double top and a few points past it. So 2750's is still possible but I'm not so much focused on the point level as catching the exact day it tops... which again I think will be this Wednesday or Thursday. As always this is a best guess based on the facts I currently have and the market cooperating with me... mean I need to see these short day to day moves continue to unfold in readable wave patterns. SkyNet has a tendency to through you a curve ball when you least expect it, which it this case would be an early top and drop with not many bears catching it. But assuming "it" doesn't the expected top is 1-2 days away.

Not much more to add that hasn't already been covered several times in morning updates and extra updates through out the day in the chatroom. We are near an important top that is expected to drop back some Fibonacci level between the December 26th low and the coming high. Needless to say it's a big drop coming. Have a great day and best of luck to us all in catching the bear.

Yesterday was a nice start for the coming down turn in the market but I don't think the bulls are done just yet. I suspect we'll go back up again soon for another attempt at a higher high. It's not looking too likely today from the looks of the futures so I'd have to think we'll see that move back up start on Monday and/or into Tuesday. This morning the futures seem to retesting the lows from yesterday but haven't broken them so far... and if they don't then possibly (on the short term) the bottom yesterday started some A wave up and the B down (for a higher low then the low yesterday) might carve out today.

That would leave the C up for the weekend and into Monday. What is the larger wave of this ABC you ask? Tough question but from the high earlier this week down to the low yesterday I count make a case for that being a completed 3 wave move down (ABC) or even a 5 wave move (tough to really figure out?), but it looks complete or almost complete. Meaning that if it was just a 3 wave move down then the rally yesterday might have been the 4th wave up and "if" we make a lower low today we'd have the 5th wave down to end it.

So the pattern is either complete or very close to completion. Now I'm not an EW expert but just try to track the simple 3 and 5 wave patterns. Tony Caldaro would be the person to follow on the larger count, which I believe he has this move down as a wave 4 (the entire 3 or 5 wave move I mean). So, when it ends (either yesterday or today with one more slightly lower low) a wave 5 up should start. I suspect it has already ended with the low yesterday but that's just a "best guess".

So I'm thinking we'll start the next series of waves up, which usually have 5 smaller waves inside a 5th wave, and that it will end into Monday or Tuesday of next week. From there a larger drop should start. Since it's the monthly options expiration week it should be tricky, like down into Wed/Thurs for the first wave 1 (of some larger degree) and back up for the wave 2 into Friday... which could almost go as high as the top expected on this 5th wave up coming next Mon/Tue, and that would fool a lot of traders into thinking the following week would be bullish.

However, from a wave count the top would have been put in on Mon/Tue of next week and lower high on Friday would only be a wave 2 up.... leaving a wave 3 down for the following week. This would be a nice trick by SkyNet in my opinion. It's all just speculation right now so let's just focus on today, which again I think is going to be weak most all of the day with a chance of a lower low happening, but I don't think it will be by much if it happens at all. Today should be the carving out process of the bottom of the wave 4 down so that the wave 5 up can start and end into early next week. That's all I have for today. Have a blessed weekend everyone.

Yesterday we saw a lot of ups and downs several times through out the day, which tricked me out of my tiny short position unfortunately. Now this morning we are having the down move I was looking for and I missed it... SkyNet sucks. LOL. But all is not lost as there should be a move back up today too. This move down is just in the early stages of forming and will still have some swings in it before a big drop happens.

Meaning there should be another move up to short again. So I'll patiently watch and wait. I don't really have much more to add this morning. I'll have to see what happens through out the day and post updates in the chatroom. Overall though I don't see today as "the day" that it falls off a cliff. There should be more days of swings up and down as dip buyers continue to step in... until they get crushed.

On the short term though a rally back up today that makes a lower high then yesterday would (should) qualify as a wave 2 (or B) bounce and another move down should follow (a 3 wave or C). Still though that move might end fast and have dip buyers push it back up into early next week, where another opportunity for a short should setup... and it should be a bigger one, like the one I'm looking for. Have a great day and may God bless you.

Looking at the SPY daily chart we can clearly see that we've now went up to the 200 day moving average. We're not quite there as an exact hit would be at 273.92 and we hit a high yesterday of 273.44 on it, so maybe they squeak it up a little more today to tag it but I wouldn't count on it. The market is about flat this morning but up from the premarket lows at 4 am EST, which had a drop down to around 272.19, which was 2724.50 on the ES Futures.

There were also some possible FP's after the close around 273.28 and 273.29 on the SPY, so my thinking is that upside area will be hit early this morning and then we'll roll back over to drop back down later in the day to hit the premarket lows. It's a common thing I've noticed for premarket highs and lows to be tagged throughout the normal trading hours.

It's not every time of course, nor guaranteed, but considering how close we are to a top and a likely pullback I have to expect some small up's and down's before a drop as dip buyers keep going buying. It might be as simple as a move up into the 11:30 am EST close of the European market and then a float back down into the close? Hard too say for sure? Maybe the float up is already over-with at the open and we start back down from there?

That's possible too, but I still get the feeling there will be some small strength after the open before going down again. My thinking is that this first pullback (not just down to the 4am lows) that's coming will trick a lot of bears as it should bottom quickly and then reverse back up into early next week for a slightly higher high then the current high yesterday. There's a lot of support in the 2700 area on the ES Futures so possibly that's the downside target?

I don't know for sure but I'm just thinking outside the box here, and that thinking tells me SkyNet is going to tease the bears on this first pullback and then run it back up early next week. So a drop to 2700 (or slightly lower) might get them all excited and wanting to short heavily, but this first drop should be short lived. From the looks of things we could see it by this Friday I believe. So don't get too excited on the short side just yet. Take it day by day and grab profits quickly as this bull isn't done yet I think. Good Luck as always.

The bulls continue to grind higher inch by inch as the bears wait patiently for them to tire out. I myself am not doing anything until I see a good bearish setup appear... or bullish setup, but that's not likely without a good pullback. Time is the most tiring thing for the bears setting by waiting to pounce and the bulls have do a great job of extending the "time window" for the top of this move to frustrate the bears immensely.

What I think will happen is a tricky surprise drop one day this week that gets fully retraced back up but fails to make a higher high. It would trick both bulls and bears I think as bears will likely miss the first part of the drop and will chase it down. Then when it hits one of the many support levels lover the bulls that missed the entire rally up will pounce and go long expecting 2800+ to be next. But the rally up should fail and just make a slightly lower high to tease the bulls into thinking a strong move is just getting started, and this double top should scare the bears out of their shorts too. If I were SkyNet this is the move I'd play out between now and next week.

Then the drop that follows that lower high should go down hard toward the 12/26 low to lure in the most bears and panic the bulls out. But I do not think there will be a lower low put in... a higher low is more likely. From that low a very powerful rally up into the summer should start. I'm forecasting out too far here I know, but since there's not much I can say about today's expected action I thought I'd take the time to speculate on "what would SkyNet do", as we all know this market is trickier then the devil himself.

For the short term I'm still waiting on a sell to setup, which I think needs to go higher... maybe up to the 2730-2740 zone? In the end it's just a "feel" or best guess for taking that short. As always, I'll add new up to date information in the chatroom as the each day progresses. These past few days have been boring but all bull market are boring. It's just the nature of things I guess. Have a great Tuesday.

Futures are as flat as a pancake this morning with little clues as to the direction today. So I'll have to just remain without an opinion this premarket morning and give the market some time throughout the day to give me some clues to where it wants to go. What would I like you happen you ask? Well, I'd prefer the bulls run it up again to the 2720-2730 zone to finish up a third wave (or C?) so I could short it for any expect move down of 80-100 SPX points. It could be more if it's a C wave up from the 12/26 low, which would complete the entire ABC up rally... aka, a large B wave. But most likely this rally will last well into the spring/summer and keep dividing into smaller waves.

So I'm thinking we are a wave 3 up since 1/3/19 (where it started) and inside that wave 3 it is likely breaking into 5 smaller waves. I think we are in the 3rd wave up inside that wave 3, so this 80-100 point drop will likely just be a wave 4 down inside 3 up, which should be followed by a wave 5 up inside a 3 up... and that wave will likely extend into early March before it tops out.

Where is anyone's guess so I won't speculate on that until we get to it. Right now let's just focus on trying to catch this short and exit at the right area. On another note, if anyone is having trouble getting into signed up for the chatroom just email me directly and I'll manually set you up. Red (at) RedDragonLeo (dot) com.

Nothing new to add today that hasn't already been covered. We are waiting on this bull to tire out and stop. The grind looks to be continuing this early premarket morning but not as strong as yesterday, so a top is near. Many are looking for early next week and their target ranges are 2700 up to 2740, which we are in that range already. I guess it will take some surprise news event to get it topped out and reversed. Funny how many times we've seen such releases of news right at critical turning points. You'd almost have to believe in miracles to think that the news is so well aligned... or conspiracy? Nah, it's got to be just a lot of coincidences doesn't it? I'll let you be the judge on that one. Anyway, that's all for now. I'll do new updates throughout the day in the free chatroom if needed. Just a waiting game for now. Have a great weekend.

So far it's looking like Scenario number 3 is playing out (referring yesterdays post)... aka, "The Meat Grinder". However, there's one very important part of it that must be met to avoid a bearish setup that would drop to the market pretty nicely later this week if this part isn't fixed. What is it you ask? Simple, the bulls need to get out of the "making lower highs" zone as it sets up a series of wave 1's down and 2's up, which eventually leads to a nasty wave 3 down (or C wave). Here's another conundrum for the bulls, there's tons of resistance in that 2720-2730 zone that everyone talks about.

Therefore even if the bulls squeak out a higher high today or tomorrow their upside is really limited. Don't get me wrong as a move up into that 2700+ area would squeeze out a lot of bears but I just don't think they can continue this sideways action much longer without breaking down hard or busting up small. Previously I thought that the bulls could do this chop crap for several weeks, like out into the second week of February even... but now I'm changing my mind. I just don't see that possible now.

A move up over 2700 to squeeze out some bears or a breakdown is very near. I'm not sure what is going to happen today as it's quite mixed on the charts but if today is a "pause" day (meaning weakness and sideways action but closing up slightly), then tomorrow should be a nice up day as yesterday was a nice down day... aka, the wave 1 down with tomorrow being some wave 2 up and today completing the wave 1 down and/or starting the wave 2 up.

Now, if we go up tomorrow and make another lower high then last Friday (which was a lower high then Tuesday of that week) then my guess is that we'll start a wave 3 down on Thursday. If on the other hand the bulls pull off a fast move up over both prior highs where they squeeze out the bears then the wave count would change of course. Then I'd call the sideways action from last Tuesdays high to yesterdays low some kind of wave 4 pennant with the breakout over that high on Wednesday a final 5th wave up that started at the 12/26 low last year. It could fall shy of 2700 or reach the max resistance zone of 2720-2730... don't know?

But if we have a pause day today (green close) and another up day tomorrow, which either produces a lower high then last Tuesday and last Friday (which setups a wave 3 down on Thursday), or a higher high (which completes a final 5th wave up from 12/26) we will have a great short setup going into Thursday. What can change that? Well, if we drop again hard today (like to 2600 or a pierce below) then I'd think the sideways action from last Tuesday's high was indeed a wave 4 down and the drop today would likely end it. Then a long drawn out wave 5 up could start and I'd guess at that point that it would subdivide into 5 smaller waves up and eventually take out that 2720-2730 zone in the coming weeks.

The reason I'd guess that the 5th wave up would subdivide is because a drop to 2600 or slightly lower would reset the short term overbought charts and allow the bulls to get a new start again, whereas if they are trapped inside this sideways trading zone that they are current in, and try to launch a 5th wave up from it, I think they will not be able to get much traction and it will just be a one wave pattern that ends short inside of subdividing.

Think of it like a bull trapped inside a tight pen. He can hit the gate to try and get out with limited force because he can't get a run at it. But take him outside the pen in a big area and allow him to get a run at some gate (gate equals big resistance zone) and his force generated from getting a run at it and his weight will probably tear the gate completely down.

That's what I'm thinking here on some 5th wave up. Do it inside the pen and upside is limited, but drop first (2600 or low) and then make another run up and suddenly that resistance isn't so tough anymore. Anyway, if you are a bear then root for a pause day with a slightly green close and then a nice rally tomorrow for another lower high, or even a pierce through both recent highs for a stop run. Either one will likely end this up move from 12/26 and allow a nice drop of 50% or more to start on Thursday.

I hope everyone had a great weekend. For me it was a little boring as it's still cold outside and there wasn't much to do around the house (not that I'm "into" cleaning as Laura does that... LOL). But I did get to think a little about the market and catch up on reading others who are good a forecasting to help fill in the missing pieces of anything I might miss. I have to think outside the box as if everyone is looking for the same thing I know that SkyNet won't make it happen the way they are expecting it too.

So I've come up with 3 possible scenario's for what I think is coming next. Scenario ONE is the favorite among many others. It's a simple upside target in the 2720-2730 SPX area for the top of this wave up from the 12/26 low, which then another drop happens. Some see a new "lower low" and another a "higher low", but that's the target high and that's my focus for now on that scenario.

Scenario TWO is one I've been thinking about, and it's where the market goes up slightly today and tomorrow with both days closing higher but failing to hit the target zone (again, that's 2720-2730), and maybe even failing to breakthrough 2700. From that area the large B wave up from the 12/26 low ends and a move down starts (again, for a "lower low" or "higher low").

Scenario THREE is where we drop some today and close down small then back up and down and up and down and up and down for all of this week and into next week too... without gaining much ground at all. It's the sideways chop pattern where both bulls and bears get frustrated because it won't top out in the 2720-2730 zone, nor breakdown hard and start the next big drop. This could also be called the "Meat Grinder Scenario".

Ok, so with 3 choices which one do I favor you ask? Number 3 is the answer. Why? Because that "Meat Grinder" pattern shows up when the big boys aren't hitting the panic button and dumping every long and getting short but are unloading some longs slowly. They sell small and the market drops small. The retail sheep buy the dip. This repeats for several weeks while they unload their longs. Then some fake news is released at just the perfect time to cause a fast and short lived "Short Squeeze" up to that 2720-2730 zone so all the bears that wouldn't give up during the multi-week chop finally get taken out. Then the high is in for the rally up from the 12/26 low and the market starts to drop.

This could after the monthly options is over for the month of February. That's the 15th as that's the third Friday of that month. So we could see a lot of chop for several weeks if this scenario plays out. I do not know which one will be correct but that's my "best hunch" as it would hurt the most and SkyNet loves to punish bulls and bears both. That's all I have for now. Let's watch and see I guess. Good luck trading.