Be ready for a low testing

 

Friday, October 13, 2023

Be ready for a low test

I have been expecting a dead cat bounce towards 4350-4400 for SPX. It has gone up as high as 4385 and headed back. Right now it is sitting right at an important line of 4350. The futures are a bit bullish with 15 points up due to apparently not-so-bad bank earnings from a few majors. So can SPX shoot up again towards 4400 to finish its final upend? Sure it is possible. But I still think its next major direction is down again and I cannot rule out the possibility that we will see a low testing around 4200ish in the days ahead. No guarantee of course but this is what I'm expecting for now and it will be the most ideal base setup for the year-end rally. Another possibility is that SPX will not go down as low as 4200 but rather come down to set up a series of higher lows to form an uptrend. This can also be the start of the year-end rally, which is of course more vulnerable for a sudden crash during the course. As I have often said, the Market God will never make traders' lives easy. There will be a lot of traps to avoid if one wants to survive this very uncertain market. I'm trying my best to decipher what the MG is telegraphing to us.

For today, let's use the initial strength to take the profit from SPY 435 bullish call spread. If SPX indeed shoots up towards 4400, it will be an ideal time to add shorts.