Here Are My Expectations If We Get a Little Puke on Monday

Because of the possibility of a “B-Wave” triangle pointed out on Friday and the risk that such a structure presents us with, I am open to a flush here.

I do not believe it will be a symptom of a greater crash coming. I do not believe there is a systemic risk large enough at present to support a liquidity crisis of that magnitude.

While day-to-day movements in the markets are often up for grabs, the greater structure that I believe we are forming is something I have high confidence about. That structure, I believe, is a big A-B-C correction (the pink letters). The question is: is it done now, or just ahead? If it is just ahead, it should be just below us in the 3900s. If we flush to that level, I think it will be followed by a very fast 500-point rally back to the 4400-4500 range, a true “V-Bottom”:

ES

I don’t know if we’re going to flush here, but if we do, I expect it to be powerfully reversed. A few notes:

  1. We are entering a volume gulf right now (green arrow). This means we may move swiftly through this range.
  2. Below that though is a nice volume ledge (red arrow). It comes from the February/March 2021 set of corrections (orange ellipse).
  3. Shooting back up to 4400-4500 will get us back to the COVID trend line (depicted in the chart above) and will get us back to the major point of control (depicted by the red line in the chart below). A nice technical confluence.

ES

Falling from here will almost certainly involve $AAPL leaving its channel (discussed here). This is not fatal, if the exit is brief. I’ve told you that the Apple channel is my “line in the sand.” But we have to leave the channel and stay out of it for at least a few days, or we need to try to reenter it and fail to reenter it for me to become bearish. Leaving it as such is not the signal I’m looking for to become bearish. A real technical rejection of the channel would be the bearish signal.

Now, I’ve said before that it’s possible that the Apple channel is a huge re-accumulation (discussed here). And if it is (I lean to the view that it is) the final move before the markup is a “spring.” It’s a huge shove to push as many longs out as possible before the markup phase. Leaving that channel will cause a small panic, fulfilling the darkest wishes of the bears here. It will be a good meal for them. But, I believe it will end up being the “spring,” the final shove in the market before we’re back off the races again.

One more flush might be just what the market needs. I discussed this weekend how the 10-year yield is close to a major trend line, but it’s not quite there yet, and maybe bonds are still a day away from their lows. I could see the yield spiking as bonds finish their capitulation, as Apple exits its channel and the S&P passes through this gulf.

Bitcoin will lose its trend line. The Nasdaq 100 would look like its bullish wedge (discussed here) is failing (a lot of people have drawn that, too), and it will absolutely feel like we’re all going to die.

And after all of that, if we do rally as I expect, virtually no one is going to trust the rally. The world will be united in the belief that it’s only a relief bounce. And I think that is what will make it a permanent rally of great duration, putting a very long-term low in.


It is possible that we simply rally from here, straightaway. But, this is my plan and my expectations if we do not.


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