Well, drat. This thought from earlier has turned out to be correct. The measured move of a flag like this is quite low. Is it possible that we do not get the full measured move?
It is. And I will show a few reasons why we might not get there (big if for the moment).
For starters, I have counted the structure somewhat meticulously as an ending diagonal. I haven’t discussed all of the reasons why yet, as I’m still giving it some thought, but a screenshot I took of it the other day for my records will explain some of that. It counted well internally at the time that I took that screenshot. You can see that chart here.
Using that idea, let’s see where internal waves sit at present with this dump. We would want to see a relationship between yellow “1” and yellow “5” of that structure. We are in between the 61.8% and 78.6% extensions of 1 now. So, this area may find support (arrow).
A little more importantly than that internal relationship, we would also want to see a relationship within yellow “5” (a 3-wave move, the pink A-B-C here), And we also have one of those just below as well (arrow):
And in both of these two cases, any kind of turn here would provide us with very sharp bullish divergence on the RSI (noted in the two previous charts).
This thought is from someone else’s work, and I will reiterate it here. He is an experienced DeMark trader. And using DeMark (weekly) bars, we are in an area of support, but are at risk of losing that. In order to hold that weekly DeMark support area, we need to close this weekly bar above the low of the last weekly bar, which is where we have the futures gap (arrow):
That’s a tall order from here as it’s now about 180 handles above us. So, we will know this much: if we fail to close up there by Friday, then we could be in trouble. But if we have a huge rally (probably starting today), then things will look much better. If not, I would look to some of the lower targets here and here as possibilities.
We also know that if this is an ending diagonal, they tend to “underthrow.” And, this last puke (if it’s the last one), may be just that:
It’s fairly common, and so it’s possible that this is normal here.
If we count the decline from the 6/9 high as an impulse for pink “C” of yellow “5,” we may count it like this with the extension happening in the first orange wave and with the futures gap in the 3rd orange wave, like this:
An important feature of this count is that since orange 1 has the extension, and is longer than orange 3, orange 5 may not become longer than orange 3 and it puts a hard cap on how low orange 5 may go. And I’ve noted that on the chart above. So, it also tells us that if we go below that, then at least this part of the count is not right.
So, let’s see what happens. Though I have prepared some lower targets last night as a precaution, I will be completely dumfounded if we actually get those. I can’t really express just how absolutely shocked I really will be. In over 20 years, I have never seen such a widely anticipated crash, nor have I ever even heard of one. In January of 2020, I was looking for a very sharp decline, and I was ridiculed quite a bit for that. It was an extremely unpopular view. And in the first half of 2021, I suggested that we would probably go at least to 4600, and I took so much shit for that, too. Eventually, the contrarian view has an excellent way of paying off.
During 2020 was a bit different. I was looking for the rally coming out of the COVID low to fail, and I didn’t see just how popular that view was until hindsight. So, so, many bears. So I really will be astonished if this falls apart that hard. I feel like I have a very good grip on sentiment here and I just don’t see how so many people can have this one right. There are very large services out there (like Hedgeye) with 100K people short the market here. I have followed his calls for years, and he misses all the turns. Every single one. Once it moves a thousand points in the wrong direction, he will then change the quads once every subscriber of his is cut to pieces and buried. I’ve seen that happen for over six years now, again and again and again.
So, let’s see what happens.