I first introduced this strange $SPX count here (it is count #6 in that article). It remains valid to this day, and I like to keep it in mind as a “crash alternative” because we must always remain vigilant for such a scenario in a market that is going straight up. The violence of upward momentum can be met with upward momentum’s evil (blessed) twin.
Now, when I first envisioned the count (which I began to postulate privately around April), I wasn’t being flippant about it, for instance, envisioning it solely because crashes are hilarious (though they sort of are). The count actually has a lot of merit.
There is one fundamental problem with every other count out there, and so far as I can see, this is the only count that genuinely solves it. And it’s this: it is highly probable that the COVID crash was only a 3-wave move. And if we take market structure seriously, we really do need to account for that.
Bulls and bears alike need to put a big 4, of some degree, at the COVID crash lows for all of their various counts (because the 2019 rally is manifestly itself a 3-wave move). But in order for us to do that, we need that low to be some kind of “C.” However, no “C” can be a 3-wave move, with only one exception: C waves within triangles.
So, this count remains possible to this day. With the Tesla squeeze, anything can happen here, especially if his tweet shenanigans cause a rush to the exits, though I would expect us to need much more to get things going for an actual crash, for instance political risk of some kind, Russia/Ukraine, anything’s possible (we have an elderly president, Taiwan, things like this can seem to come out of nowhere).
So, just keep this in mind, I know it’s a wild thought, but if we do start selling hard, we don’t want to be sitting around clueless as to how we can account for it. We want to know in advance what we may be facing.
And even for things like $AAPL, I don’t know that cycle (yellow) 4 is “in” (discussed here). If the S&P did something wild like this, it would give Apple a much bigger “cycle” 4 followed by new all-time highs for a serious, respectable cycle “5,” etc. And it would give other tech giants a real chance to form genuine divergence on long-term charts, and even with the S&P, we lack monthly MACD divergence and a move like this would give it to us.
One last thought: you know how folks will say, “Look, just follow the trend, man.” And you know how they’re almost always right? Now, when they say that, they mean, “If it’s been going up, expect it to keep going up.” But, we can ask ourselves, when we back out and look at this: what has really been the trend to follow? Volatility has been the trend. And so maybe we shouldn’t expect that to end any time too soon.
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