On New Year’s Eve, we posted the following charts predicting today’s 3rd wave drop:
Indeed on Sunday night, the S&P Futures (ES) popped up over 2040 in a pink wave ii — but what followed thereafter was a super quick drop from over 2040 to 1980 — a 60 point drop basically overnight. First we had a leading diagonal, then a b-wave consolidation overnight, then an a-wave into the market open, a b-wave rally during the day, and the beginning of 1-2-i-ii.
On Sunday night, I even alerted to our subscribers via mobile text alert with an update on our positions — that we should be in good position going into this week. TF, the futures contract for the Russell2000 was still at 1135 at that time — now it dipped below 1100 and it’s below 1110.
I do have to note that we did cover one of our 2 short positions on the TF Russell futures.
Recall that on November 30, 2015 – we posted a blog entry saying that we shorted TF at 1197.5 with a stop at 1208. Well, we covered that short at 1109.9 today. Clearly, the market kept going down — but that since we were already short a second TF contract from 1145.5 – we decided to reduce our risk.
How much is 1 contract in the futures? Well, basically each 1 dollar move in the TF futures is worth $100 — so our short from 1197.5 all the way to let’s say 1110 — was an 87.5 dollar move in the TF futures — which is effectively $8,7500 in profits. This is one of our better trades — we had the conviction to enter at the right time and to hold for so long.
For those who don’t have the time to watch the market — say you have a day job, etc — we recommended a short call spread of 209/212 last Thursday — and we added to that position—an SPY short 207/210 call spread on Friday. As long as SPY does not go towards 207 or 209 strikes by this Friday, then we would collect the maximum profit for that trade. That way – it’s a high probability trade — and if you need to do other stuff, you don’t have to worry so much — because we knew it was a high probability trade — higher than 80% probability based on our analysis above.
What happened over night was the 3rd wave that we were expecting — though it went even farther than we were looking. We expected 2000 — but it went down another 20 points towards 1980 before a bounce. And I was expecting that to happen sometime in the first half of January 2016. Well, we got that pretty much on the first trading day of the New Year!
At the close we got a significant a-b-c wave rally as a wave iv — expecting the 2010-2015 resistance to push it back down. We’ll see.
If you haven’t already watched this, I encourage you to check out where we are from a larger time perspective: