The failure of the market to take out Key Levels and stay below them has resulted in negative trades so far in 2024. Yet, as the charts below will attest, the downside potential is huge and even more persuasive as it has been when those trades were entered. What's an option trader to do? Get up off the floor, dust off, and wait for the next set-up. Premium Service - January 2024 Trades Both these trades were up enough to allow exiting at about break-even using a 50% trailing stop. If not stopped, all is not lost, but, the market has to turn down soon or it will be. IWM has been leading the market down since the Dec 27 high and until late this week, our trades were up nicely. Unfortunately, such is not the case this weekend. For those exiting on the trailing stops I will be providing re-entry points this coming week. IWM Long Term EW Count (Weekly) Longer term the anticipated Wave 3 deep dive is still in its early stages, last week notwithstanding. The retracement of the first leg down has done what all retracements are designed to do, scare the weak hands out of their positions. It can go on up for a day or two, or even longer, but the resolution to the downside is coming. IWM Daily Another touch of the Fib retracement zone is possible, or a reversal straight down back below 192.00 next week. If the latter, we will be aggressively buying puts, stand-by for new trade alerts. Cycles: 2 Year Cycle Top & 4 Year Cycle Low This is a 2 and 4 year monthly cycles chart from Elliott Wave International. It has caught the major two year tops with uncanny precision. It projects a top new NOW, while at the same time projecting a 4 year cycle low due around April. The only way that happens is if there is a crash over the next three months (See Feb-Mar 2020). This chart in and of itself argues strongly for betting heavily on the next IWM breakdown. Note the performance of the S&P Large Cap versus the S&P Average Stock. This dovetails nicely with the IWM Long Term Wave Count and the anticipation for a cycle top due anytime. The euphoria over the performance of a handful of tech darlings is nothing more than a game of three-card monte. Stand-by for new key levels & new trades coming next week. Bitcoin (BTC) Waiting for downside resolution with a break below round number support at 40,000. The BITO options are not very active, meaning not many are betting on any downside beyond what has already taken place. As a parting observation, note how the Weekly Bitcoin and Weekly IWM charts are sporting the same longer term set-up for a Wave 3 down. Random coincidence, or insightful prescience? We will know soon enough.
