Ideal trade plan for the month ahead. for SP:SPX by holeyprofit

First things first, the null hypothesis for this is price trading over 4190. That’d trigger the system stop loss area for this strategy. This is valid under. Above there we have a full re-write of plans.

At this point I want to start actively betting on a large crash. A drop of about 30%. Retracement. Then a second drop taking us under the March 2020 low. If you’ve followed me for any length of time, you’ll know my premise has always been the crash would take us under the March 2020 low. I’ve said this all during the late 2021 rally.

I think the idea people “Missed out BIG” in 2020 rally is going to prove to be a short-lived notion. Like the idea people who missed out big in 2021 already is. We’ve wiped out the gains of 2021 in the first 6 months of 2022. If you bought in 2021 and never took profit, you made nothing. No one missed out during 2021 by not following a buy&hold strategy. That’s a fact at this point. I think 2020 will prove to be the same.

I think the optimal short comes around 4080 – 4100. I think it might be a second retest of the 161 area.

I also feel it would be fitting for the move to not happen for another week or few. Give people enough time to think it’s safe to get back into the water and grind out the shorts before the big moves comes. This is a combo of basic market norms and game theory – It’s easier to get liquidity by grinding the market slowly higher, and the market will seek liquidity before it drops (Assuming it will). Markets do that.

With this all being said, if the drop would be 30% and the upside move has 3% to it – do I want to miss the 30% move for a 3% improvement on my entry? Not much … I probably want to take up light positions swing short and then take up short term bullish positions to put me market neutral in all instances except from a bear break (In which case I lose small bull trades which is a nominal price to pay for insurance ).

This is probably the plan. Build up swing shorts (Hopefully at progressively better prices. We call that “DCA” when bulls do it. Gets called less flattering things for bears, usually – but it’s the same strategy) and I want to concurrently run long positions to keep me mostly market neutral (Skewed towards net long while higher lows are holding on small charts).

As we get into 4070 – 4100 this is where I’d stop hedging long and take full short exposure. At this point I have only a little risk area left before the short thesis fails and I am willing to be more aggressive.

If/when we see an early rejection from this zone, I want to see the market SLOWLY slanting off. It does not have to crash all within 5 minutes of me going short. Markets usually top very slowly and then suddenly break viciously. I want to see us slanting off. Trending down with lots of false rallies and if/when I see this I’ll start to take my aggressive lotto bets.

This is when I’ll start to think about things like 3000 strike puts (Shorting 4100 – 4200 call spreads to offset my lotto bets). From the quiet slanting range, that’s where the crash would start if we were following typical crash models.

Target one swing one is 2800. I’ll probably start offloading my positions 2900.