In addition to the long-term structure discussed here, there is another that I will also consider. It is also possible that we have been in a very large broadening pattern. There is a sense in which this may be my favorite alternative because I think very few would see it.

On this interpretation, we may continue to rally to the “bull flag upper rail” (the middle green trend line) and then congest for a bit. I like this because it seems to me that the vast majority of people do believe this rally we’re in now will fail. And I hate that. I would hate for them all to be right—as many of them were about us getting to 4000 or less.

So, on this count, it’s just a huge, stupid structure intent on tiring everybody forever and ever. At that orange A-B junction, that’s when I think most people will be inclined to believe the rally will fail, and it would be best—I think—for the market to go and do what few would expect, namely, to gallop suddenly to all-time highs. And in that move, of course everyone will will be celebrating the looming “melt-up” to 6000+, only for us to then actually have a real crash that everyone is now expecting (for the “E-Wave”).

The bears who want this rally we’re in now to fail, want it to fail because they want to see the capitulation low (we haven’t seen that on the VIX yet, for instance). This would give it to them, but only much later (down at that yellow b).

So I like this one the best. I think it would be the least expected.

I want to believe the lows are in because of the supremely bearish sentiment. The bears are—in my opinion—dangerously overconfident.

The dark thought from earlier (here, here and here) has us going fairly low, and I would hate for that overconfidence to be so rewarded.

I have an alternative that may solve some of this.

Looking at the big picture, I am generally persuaded that the advance off the COVID crash low may not be an impulse wave. I have discussed some of the reasons why before, but, let’s grant that thought as an exercise.

If it’s a “B-Wave,” then COVID crash may have been an “A-Wave,” which means we should be in a “C-Wave” now, like this:

Read more “A Macro Structure Speculation on $SPY”

If the market is covertly bearish here, I would expect something roughly like this.

I would expect this choppy move down we’re in now (since 5/30 high) to be a leading diagonal of minuette (orange) degree. We would see a bounce that fails with some drama for the orange 3 of blue 1 in the coming days. Then I would expect some consolidation for the orange 4, a lower low for orange 5, and then some kind of bounce for blue 2. The orange box below is where some of this may occur as it’s an area of prior consolidation and the 50-61.8% retracement area of the advance off the 5.20 low.

After that, if the move still looks right, we may fail in an even larger degree (blue) 3 below 3700 before consolidating again in the blue 4 down there, etc. This speculation implies that minor (green) C will equal minor (green) A, but there are other fibs that would work as well.

A powerful rally taking us well over 4300 (the 5/5 high) will call this into question. If that happens, I will still be inclined to the view that we need to go to the bull flag upper rail.

That may still happen, but this rally has stalled in a weird way, and at a weird place, and so I’ve got to keep my eyes ears open to this alternative.

In order for the ultra-bullish count to work, my expectation was for further upside in the short-term.

We’re not really seeing that just yet.

As it stands as I type this, we will open below Friday’s close. That throws a bit of a wrench into the very bullish count, as I would still expect a good gap somewhere in here.

The advance from the 5/20 low now looks a bit odd. If we’re in an impulse up, we should be consolidating and moving up, but the drop now from the 5/30 high is about 80 points and it feels like a new structure may be forming. It’s sort of a big pullback for us being in this stage of the super-bull nest. While I won’t throw that out just yet, I will add this cautionary note.

Back in my “Dark Thought” post, I pointed out a way to count this whole scooping bottom as a “B-Wave.” And if you look at the last example in that article, the fact that we haven’t continued to go higher just now leaves that on the table, as we’ve now ended up only coming to that “expanded” triangle’s trend line, like this:

I’m not predicting this per se. But until we continue to move up, it’s back on the table as a thought.