Today’s S&P500 upwards movement was spot on as expected.
In yesterday’s post: Tuesday, 2/16/16: S&P500 Daily Technical Analysis: Retrace to 1870 and Back to Highs, I noted that “in the immediate term, I am expecting a break of 1900, ideally tomorrow.”
That’s exactly what we got.
In fact, in my chart, I noted a yellow C wave that would rally 1920:
Not only did we get the overnight break of 1900, but we also got a follow through rally over 1920 towards 1927, which occurred shortly after the Fed minutes were released around 2 min on this Wednesday.
As I’ve been noting in past few posts — this rally may not have any significant retraces whatsover. Starting from around 3am overnight, there was pretty much no retrace — even after the market opened — it just went straight up. Maybe it consolidated, but it almost never retraced until shortly before the Fed announcement at 2pm. But even then, it just popped back up.
Our trade of the week initiated yesterday is pretty much at 90% max profit. We benefited from a collapse in volatility from this rally, some time decay due to weekly options expiring this Friday, and most importantly, the directional bullish bias we had on the trade that worked out in our favor thanks to our chart analysis. We were able to put on this trade and relax because we knew it was a high probability trade.
At this point, we’ve had a pretty much nonstop rally from 1802.5 all the way to 1927 without any significant retrace. Right now, I’m letting this potential next retrace play out from 1927 and see how far it goes. We could potentially go up over 1950 and I’m wondering whether this giant rally was just wave A consisting of A-B-C –and then we get a larger B-wave retrace, before C-wave up. Or if we get a minimal retrace and simply continue higher above 1950. I’m leaning towards the former but need more signals from the market in the next few days to get a better sense.