The market is over-extended in multiple layers of sentiment and momentum, yet it still reamins elevated in terms of price. Historically, this is the best time to establish short positions, i.e., index put options, in advance of at a minimum a retracement lower and at a maximum, a bear market deep dive. It is a very hard trade to take, especially on the heels of a failed attempt to the the same with our January-February puts. Nonetheless, the set-up is there in IWM (and to a lessor extent SPY, see chart below). If IWM confirms the Wave 2 completion by falling out of the Fib retracement zone, the other indices will not be far behind. IWM - Daily The set-up is a Wave 2 retracement into a Fibonacci reversal zone, while the trigger will be a close beneath the bottom of the zone, below 194.00. Aggressive traders can still look to the Feb 16th "next month" expiration, but my preference is to buy a little extra time and go out to March 15th expiration. The EW pattern is calling for a drop to below 170, meaning the 195 strike has potential to rise 5X. IWM - Short-Term (30 Minute) Trigger: IWM close below 194.00, requiring at a minimum a small leg down. Absent that lower close, trade is "Pending" only. SPY - Daily This is a classic Elliott Wave 5-Wave impulse pattern that terminates at the parallel channel going back to October, 2022. It's possible SPY can peak above the top channel in a headline grabbing buying climax prior to a reversal back down, but it is just as likely to touch the channel top and immediately reverse. SPY is on Alert for a reversal down, either now, or after a blow-off top. Boeing BA This BA chart is from my watch list for puts in the PRO Service, but I decided to hold the trade until after earnings, due out Jan 31st. (My bad, next time I'll just warn about earnings.). Note that the pattern is the same as the above IWM set-up and Wave 3 down is just beginning.
