Forgive Me for Doing This to You

Now, I know it seems like I throw a lot of ideas around, and it’s because we’re in a giant triangle—I believe—(that’s where the upcoming “B-Wave” comes from) and it’s a volatile structure, full of uncertainty and I have to try to navigate through it on almost a day-by-day basis. And though I use many “risk signals” to help me to guide my counts, since we’re not in a trending market, I may seem like I’m flip-flopping around a lot, and while I am in a sense, it’s not been a bad strategy, as I’ve caught the basic motions of the market fairly well, though timing precise bottoms and tops is always most difficult.

What I’m going to do here is lay out an alternative that has just come to mind today based on many things I watch. I’m going to walk through all the steps so that you can see it’s been reasoned out and is not simply a whim.

Now, I’ve been bearish here, and that’s paid off, as we just gave back a big chunk of that rally in a single bite. I adopted a bearish tone on the 28th because some of my risk signals were winking at me, and we went exactly sideways and then got this nice flush. But maybe that’s all my risks signals were pointing to, for all I know.

I’ve acknowledged the possibility for us to make another push up but something helpful has happened today. There are two instruments that have been especially challenging for me: Bitcoin and the Nasdaq 100.

With Bitcoin, I first thought it was going to rally, and when it didn’t, I expected it to fail. And while today is sort of a good start, it’s not been quite what I was expecting and it’s given me a big clue. In this chart below (from a prior post), I expected a fairly significant 5-wave impulse from minor (green) B to minor (green) C.

BTC

But we’re not really getting that. This latest motion looks only to be a small, 3-wave move. And the original motion (minor [green] A in the chart above) is also a 3-wave move.

BTC

There’s not a lot we can do with that. One way many folks try to start and end with 3-wave moves is through the use of “triple 3” corrections, commonly known as “X-Y-Z’s.” Now, I don’t want to discourage people from using them, but they’re not a discovery of Elliott himself (they were invented by Prechter). I do have a personal view of them, and it’s that they’re abused, used more often than they should be. I often find that it gets people into trouble. (This is not to say you shouldn’t use them, it’s just a personal choice of mine.)

That said, the way I solve the double 3 problem is through nesting A-B-Cs. And I often find it works well, and so let’s take a look at what happens with Bitcoin when we do that here:

BTC

On this view, we got 3 big waves down for minor (green) A, then a retracement, then this little 3-wave move down for minute (blue) b. What this should mean is that we’re actually still in the middle of minor (green) B. And if so, it suggests—should we find support here—that the next move will actually be a powerful 5-wave rally for minute (blue) c to finish minor (green) B. But wait, there’s more. And so of course that means we will then need the big minor (green) C which will take us pretty low (the orange box below us).

What all of this means: Bitcoin is a terrific measure of systemic liquidity, as it’s turned out. And if it’s going to rally in a powerful impulse wave (the blue c), equities are not going to crap the bed here.

So, this tells me that we may have a powerful, perhaps multi-week move up, followed by an even more powerful—also perhaps multi-week—move down. And so I think I can use that to assist in the equity markets, such as the Nasdaq 100, which has been giving me a lot of trouble.


Before moving on to those, I want to point out something I sense regarding sentiment. It’s amazing to me how quickly folks rush to very bearish counts and other forms of analyses the moment we drop a percent. It’s just not helpful. What I’d like to see is folks expecting a correction, getting it (then buying it), then getting crushed because it’s not a correction. What keeps happening instead is people not expecting a correction, getting one, then panicking and immediately calling a major top, and then getting crushed by that.

People really are one foot out the door. Just about everyone has some version of this for $ES:

ES

Now that’s what I’ve got, and so it’s not as likely.


Another quick aside to point out is Oil. Like Bitcoin not doing what I expected, it, too, was hardly fazed today. It should be leading us lower, and it’s not. And when that happens, I take it seriously (more on oil later).


Now on to equities. To review, I think there is a good chance that everyone is counting the indices incorrectly as an impulse wave, whereas I discovered a nice way to count it as a correction, and quite possibly one that replicates the Nasdaq’s dot-com bubble structure. You can review that basic thought here. What I don’t know is: where are we in that triangle? Is it done now? Does it finish just ahead of us? Does it finish far ahead of us?

Is it this?

ES

Or this?

ES

Or if Bitcoin is telling us to expect a multi-week rally followed by a big drop later, then what’s stopping it from being this?

ES

I have no idea. We would like to see a trend line form between B and D, but I have no idea if D is even in, so it’s possible that we go up more than even I expect (what I’ve been noting in posts with these possibilities where the green trend line is just above us).

So, if Oil not puking here is a sign, if Bitcoin not puking here is a sign, if everybody getting immediately too bearish is a sign, then maybe we’re due for another big rally to get everyone bulled up. I’ve said this before, but I really don’t like big selloffs (3rd waves especially) forming entirely during market hours. It gives folks too much time to hedge, and they did today. I’d rather have seen a gap in the middle of it. If we’re bearish here, this would have been a third wave.

On then, in the spirit of pissing all of you off by throwing too many ideas out there, if Bitcoin is set for a 5-wave rally, then I would expect equities to as well. I also particularly like the look of what I think could be a triangle in November and December (green arrow). And if it is a triangle, it’s a B-wave here, and that should mean that it is followed by a C-wave, which should be 5-waves of it’s own. So here’s what it could look like, as sick as it sounds, maybe we’ve just done the 1 and 2, 3 is coming, then a 4 and a 5 for D, followed by 3 waves for E.

ES

Now above, I suggested that Bitcoin is (based on today’s lack of deep failure, the big clue for me) poised for 5 waves up, then 5 waves down. And Bitcoin tends to lead equities; so, combining these thoughts: as equities rally in 5 waves for minute (blue) 3, Bitcoin rallies in 5 waves to its minor (green) B. (I’ll post the chart from above below so you can visualize this.) Then while Bitcoin does it’s 1 down and 2 up for its 5-waves to minor (green) C, equities will do their 4th and 5th waves. Then Bitcoin will do its 3-4-5 to the downside while equities do their A-B-C for E (of B). That’s the thought.

BTC

The Nasdaq 100 could look like this (also note the nice triangle—green arrow):

NQ

Or, since today was deeper on the Naz than on the S&P, the minute (blue) e could be in today, making this one wave behind the S&P (but that won’t particularly matter for the time being).

And the Russell, could look like this:

RTY

Now I think its D-wave is already in, and this is perfectly intelligible because it almost always leads the other indices.

And finally, Oil may do this.

OIL

It, too, tends to lead equities, and so it would make sense for its minute (blue) 2 to already be well behind us while the S&P’s minute (blue) 2 may have formed just today. It will thus reach orange D before equites do, and turn lower before equities do (if this new assessment is correct).


In sum, I was looking for a selloff and I got one, but in the midst of it, oil and Bitcoin in particular didn’t do what they should be doing if we were about to enter a big, bearish move, and, to the contrary, they may be poised for big rallies instead now and so I am adjusting the spectrum of possible paths forward and communicating that to you. If we continue to sell off, the bearish view is still alive (most clearly seen here). But oil and Bitcoin and the put-to-call ratio are telling me that may not happen.

And the short-term bullish possibility (noted as the first idea in this post) doesn’t account for the magnitude of the move Bitcoin may produce.

I know it can be distressing to see new thoughts pop up, but I’ve got to respond to what I see in such a quickly moving market. Once I feel confident that the big pink B is in (assuming they drop all the restrictions because everybody got mild omicron—I did, by the way, getting over it now as a matter of fact; light fever, headache, not too bad), then we should see a long, trending market, similar in nature to the rally coming out the COVID crash lows, and it will be much smoother sailing for a while. At least that’s the hope here. Until then, we’ve got to try our best to anticipate this wicked structure we’re in.


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15 thoughts on “Forgive Me for Doing This to You”

  1. Aren’t expanding triangles rare? That would be a lot of expanding triangles. Though, since markets are quite correlated I guess it could work.

  2. I think we are in a supercycle triangle in gold. It is an interesting thought that many different markets are heavily correlated.

  3. Your charts are eye-openers ! Now your latest projection for $APPS makes a lot of sense , could you give us revised counts from your latest bullish stocks, Dereck ?
    Only if it’s not too much of work to do.
    Thanks for amazing projections and your thoughts that led to do them.
    Have a bright New Year !

  4. Great analysis!

    Noticing that lately 10yr yield is bottoming slightly ahead of the mkt. I suspect it has still a bit of room to run up and won’t let SPX bottom in next day or two.

  5. I am working on one, and I don’t have one I like just yet. I do think it should rally if Bitcoin does, but as far as a count, I need to work on it some more. I will try to have one up soon.

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