If We See Weakness From Here, This Is My Plan

It is possible for the market to continue to go up in the short-term. We are no doubt certainly overdue for a big rally.

But, given the wave balance discussed here, the general “look” of structures here and here, the risky wedge on the $VIX (here), I am leaning to the possibility of further weakness; though, if we do get that, I am not expecting Armageddon. I am favoring something about like this:

ES

The 5/20 low (where that orange “B” on the far left of the chart is) was an excellent candidate for the low. But, we needed to see a full 5-wave advance off that low, and of course, the consolidation in early June—which I had hoped was a “4,” turned out not be that at all, as the structure completely failed. That has made everything (going up and down) look to be unfolding in 3-wave moves. A gnarly, unending series of corrective structures.

If we fail here, then the rally from our recent low, will also be only in 3-waves, and this can continue for a while still.

If we do drop, this falling wedge accomplishes many things:

  • It allows us to fall in a final “5-wave” move (for yellow “c”), without us needing an actual full-bore “crash” to do it, which I still think is very unlikely here.
  • It allows us to retest that 250-week EMA, which we do need to do from time to time; might as well do it now.
  • You will see how well this structure can revolve around that EMA. Getting to it (for pink 3) should produce a bounce (for pink 4). A lot of people want to buy that. Then a drop will make them all regret their lives, as pink 5 takes out the very EMA they just thought would be a good long-term buy. Panic sets in, everybody freaks out, and we get the nice bear trap down there (they expect a crash) while bulls will then be afraid to go long because they just lost the “support” they just bought (the EMA).
  • And, finally, consistent with the long-term view (here), it can offer us a very nice long-term fib relationship down there around 3318.

So, let’s see what happens. We can certainly keep going up, but if we don’t, which is what I’m leaning toward, I think something like this can happen.


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