I’m Sorry to Be Like This, But We Could Crash

Earlier today, I already pointed out lots of things I don’t like here.

S&P futures, did, in fact end up rejecting that trend line discussed here. And I hope you can appreciate how ugly it looks, just in a general way. The May 20th low was an excellent candidate for a major low. But the drop we had from the bad inflation print caused that huge selloff and we lost that trend line. We tried to recapture it at the end of June, lost it again, and we’re trying to recapture it again now and so far we’ve failed.

ES

And given the fact that we’ve done that in a bear flag makes it look even worse:

SPY

This looks terrible. I don’t think we’re going to make it to the upper rail again. I hope I’m wrong.


The ending diagonal (discussed here with explanation of the target) is still possible:

ES

But there are now some problems with this interpretation:

  1. “Pink” 4 no longer touches the red trend line, which would be weird
  2. The orange “B-Wave” triangle we might be in is now awfully big, rendering it much less credible
  3. And we’re losing the “contraction” in price that makes a diagonal a diagonal. The closer we get to parallel red lines, the more bearish it gets, as I will explain below

Now I wanted it to be an ending diagonal because it was plausible and it was optimistic: it implied that we’re going to be ok in a few weeks, as that 3420 area would likely be the bottom of the decline for once and for good.

But, if it’s not an ending diagonal, things can get much, much worse (or—hopefully—I’m totally wrong).

The problem comes from the fact that at least from the 3/29 high, everything from there lines up almost too well as a series of ones and twos to the downside, complete with a bear flag and a 50% retracement to the tick at today’s high for orange 2:

SPY

If this sort of nest is right, the measured moves for all the threes are frighteningly low, inviting us to revisit the COVID low itself by the time they’re all done.

That sounds incredible. But, I still can’t unsee the series of coils on the $VIX, first a huge wedge (red) and then all these bull flags within it:

VIX

This has everything it needs for a huge spike if it needs it.

And Bitcoin looks just terrible here. I was reluctant to get too bearish on it previously, because the structures it formed on the way down weren’t too awful. But this is awful. It’s one of the most well-defined bear flags I’ve seen in a long time, nice and tight after a steep drop. We have a nice fib touch at today’s high. And the measured move of the flag is ridiculous:

BTC

I have no idea if it will get to that. But you can see why we might want to be concerned. Maybe even very concerned. Now, I’m no crypto expert. I watch it because of its implications for systemic liquidity. And I know there are exchanges blowing up out there right now. So who knows what can happen with this. But, at least for now, this looks awful.

And adding to this, we can add what I’ve already discussed about the Russell (here) and Microsoft (here), etc. The Russell looks no better now than it did then. That purple channel in that post was resistance all day.

I don’t see anything that makes me happy here. I hope I’m dead wrong. I wanted at least to see the ending diagonal work out. But I’m now even skeptical of that. There are relatively few puts in the system. Most analysts I see (even bears) are expecting higher prices (~4000 or so). And so I think we at least have ingredients in place for a drop from here instead.

I hope I’m proved wrong, but all I see is risk at the moment.


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