A Macro Structure Speculation on $SPY

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:


Now, a “C-Wave” should be a 5-wave structure. And if we’re in one, this latest rally especially has certainly caused a serious overlap and so we can rule out a regular impulse wave. But perhaps then we are in an “ending diagonal” (as depicted).

If so, we may rally a bit more than my dark thought suggests, before another spill that does not go as low as the full “C = A” extension suggested here. It’s possible that we squeeze the bears a bit more now, heading to the red trend line above, before falling again, but by not as much as they might want and only in a 3-wave move, which they may not expect (each leg of an ending diagonal is 3-waves):


So anyways, something like this is also possible. I would suppose, I will approach this as follows (personally): below that upper trend line, I will remain supremely cautious, if not outright bearish in the short-term. Above that, I will feel more confident about the bullish case.

The point is: I’ve become a little skeptical of this rally now, because even if we’ve had a 3rd wave, I don’t really like the price action over the holiday and this drop this morning. If we’re really in an impulse wave, in this stage of it, I would expect a lot of buoyancy here. That upward pressure feeling where it feels like there’s a lot of inflows, like the market doesn’t really want to dip. It lacks that feeling here, so I am cautious.

Note: When articles are first posted, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, patrons of any denomination (you get to pick the amount) will be able to read my weekend analyses, Tier 1 members ($20/mo.) get access to all of the articles I write, and Tier 2 members ($35/mo.) get access to those, plus counts on other instruments and my Discord chatroom.

One thought on “A Macro Structure Speculation on $SPY”

Leave a Reply

Your email address will not be published. Required fields are marked *