3Xtraders : Market update 7/6/2017 - continued consolidation

Thursday, July 6, 2017

Market update 7/6/2017 - continued consolidation

Seeing a surprise downside move led by European markets, overnight.

This takes us back to the 2418-19 level, which the market has tested several times over the summer, and as best I can tell this points to wave "B" (bullish) consolidation. I had thought we had completed a pullback (in wave 2) yesterday (ahead of the Fed minutes), but all we got was a weak rally...

As usual trading over the summer, and into a another holiday, turns out to be somewhat unpredictable, and a waste of time.

The one bright spot has been in the oil trade, where we most recently saw a false breakout, followed by support being taken out...

$USO - seen snapping back - in another wave "B" - this morning.

$SPX - seems to be trading in a contracting triangle (seen in purple). Wave "b" is often a triangle, but not always...

Alt: Chart - an extended wave B trading in a broader range.

Alt Chart 2: SPX consolidates into a down turned (yet more bullish) triangle (or wedge).

Like I said; wave B's are hard to predict, for several reasons: 1. They can trade into any pattern, including a triangle pattern. 2. A triangle pattern can trade into an upturned wedge (rare), down-turned (wedge common), sideways contracting, expanding (broadening)... 3. Consolidation patterns take time to complete, and patience is a virtue. This make trading it a chore. 4. Each move within a triangle pattern divides into it's own separate, corrective, pattern (usually, but not always a zigzag). Wave's C, and E, can resemble triangles, when trading in the larger triangle pattern.

I think part of this is just normal consolidation, but I also believe the powers that be want to hold the market down, until they return from summer vacation, and then drive stocks up into July OPEX. No doubt they placed bullish options bets, as the $VIX peaked out, last week. They dumped their shares, before leaving town, and collected on their bearish Put options, and when they return they'll be forced to put that money back to work, and those in the know, will collect on their bullish Call options.