The stock market charts below carry one unanimous, confirmatory and opportunistic* message, three parts to a whole: (1) The next major leg down in the bear market has begun. It actually started 10 days ago on August 16th [see Wave (2) tops]; (2) It has unfolded in an initial wave down into last Monday's lows, then a 3-day counter-trend retracement rally into Powell's Friday morning's speech, and then into a Wave 3 leg down, beginning with Friday's 1,000 pt DJI decline; (3) The strongest part of the decline lays directly ahead. *Opportunistic = high probability set-up for a significant move down over the next 3-8 weeks. You can make of it what you want, but for me it's all-in on the downside, i.e., index puts and volatility calls. DJIA - Wave 3 Down Kicks off with Trend Model Sell Signal QQQ - Wave 3 Down Kicks Off With Trend Model Sell Signal SPX - Wave 3 Down Kicks Off With Trend Model Sell Signal IWM - Wave 3 Down Kicks Off With Trend Model Sell Signal Volatility: New Intermediate Term Buy Signals - UVXY & VIX Trade Management Bigger picture short positions should assume much lower prices for both Sep 16th monthly options expirations and even more so for Oct 21st monthly options expirations. There are three weeks left in the the former, eight weeks left in the latter. With the holiday weekend coming into view at the end of next week I would consider moving some to all of my expirations from Sep 16th to Oct 21st in the next 1-2 weeks. As we have seen all summer, these periodic counter-trend rallies can reap havoc on our option gains. After a big move in our favor (like Friday) consider rolling out to new strikes, but banking some gains along the way. There are five major ETF's that are put candidates, SPY, QQQ, IWM, IYR and DIA. By the end of Wave 3, sometime this fall, it won't matter which ones you own as all of these puts should be up 3X to 5X to 10X (in the event of expected trading halts). If volatility follows the same path it did in the 2020 Covid Crash, the at-the-money calls for UVXY/VXX can easily and quickly be up 10X and more trading further out-of-the money calls. A particular call of interest to me is the UVXY Oct 21st $20C which closed Friday at around $0.50. A "Covid Crash" repeat would send UVXY up over $100, sending those calls $80 in-the-money, i.e., $50------>$8,000. [Disclaimer: Don't bet the farm - these kinds of moves don't happen very often - but the set-up is there, if you are so inclined.] UVXY - Covid Crash Buy Signal Performance PS: One Last Chart - Bitcoin "Follow The Leader"
