A Few Remarks I Can Make for the Weekend

I can’t really make a firm decision one way or another here.

On the one hand, I have been expecting this to be a bear market rally that would soon fade. Soon is now a poor thought to have had. First this whole recent structure became far larger in time than I expected, and now it’s quickly becoming very severe also in terms of price. Even if it does eventually fade, it will be a smaller victory given the extent to which I have been wrong to expect this to fade in terms of both time and price.

But let’s walk through a few things.


First, crypto looks not so great but also not so terrible as it did.

Bitcoin, which I have maintained has been in a bearish structure, has done nothing bearish with that structure (yet):

BTC

This bear flaggy look shouldn’t belong at a lasting bottom, but it has done nothing to break down yet, either. It, like the S&P futures broke up from its flag. But it’s not exactly been moving much from there, either. Has it simply found resistance here? Are they simply distributing it—again?. It’s at good fibs for a top, but there are a variety of ways we can choose to label the structure because it has so many ups and downs.

Ethereum is in a similar situation, but actually perhaps better. Last discussed in this post, I expected it to reject a trend line that had previously served as overhead resistance, but it did no such thing and that trend line is now below price (green arrow):

ETH

Despite that, if it is a two, those often retrace to the areas of the fours of a prior degree, which it has done (red arrow). And, this is also now at a reasonable fib. If it does roll over here, it would be intelligible to me. If it simply rallies in a new long-term bull market, it would be less so because the initial move off the low looks clearly to be a 3-wave move (I’ve labelled that on there as a green A).

That’s the same problem I have encountered on the S&P, especially in regards to the futures market, which gives clearer full waves. It’s that initial rally that bugs me, because I can’t find those at market bottoms.


And yet, there’s nothing quite like getting completely stuffed to make one question one’s thesis and I really do need to here.

Now, I listed 3 possibilities for this rally to still eventually fade (here), and we’re now deep into the territory of option 1 from that article. I’m not entirely sure what to do, specifically what to actually call for. This rally sort of feels like it could have some real legs, especially since Tuesday. And that’s one reason I opened the door to an unusual “bottom” having formed there (I discussed that here). The 45-degree angle we’re now grinding in feels more like program buying rather than a short-squeeze.

I can say any of four things:

1. Of the choices I have, I can say we’re either in a rally that will fail soon, the point at which, I would like to see good wave balance in the structure. We had that at the open (foreshadowed here), but we’ve gone far enough from those, that I don’t see balance here now (I will still look over the weekend some more, but I don’t have anything yet).

2. Or we’re in a rally that will fail but at much higher prices, and I guess I can’t really predict that. I mean, I can point to these spots on the chart, but I also trade, and I like to have conviction, and if I think this is going to fail, I’m not very comfortable longing into something the bottom of which could drop out at any moment. I like to say, “we’re going to go there, I think” and have a good reason for saying that. Part of the problem is the overall structure. It’s been mostly a mystery since day 1. It’s an unusual decline, choppy and overlapping all the way down. And because of that, there’s too many ways to effectively count it to have strong convictions about one count over another.

3. Or we’ve totally bottomed at the actual low in June and we’re in a 3rd of 3rd and I missed the ideal entry for that (discussed here). That would be a damned shame. But, if we were in a 3rd of 3rd, I would have expected a large gap today that didn’t almost immediately get filled. So maybe that’s not as likely. If we keep going up with violence, I can’t rule it out though.

4. And finally, the Silver Lining. If the market is actually genuinely bullish, this would be my most-hoped-for outcome, as it would mean we still get to try to capture the important structures ahead of us (we want to trade 3rd waves when at all possible, and this outcome implies that the most important ones still lie ahead of us). Let’s take a closer look at that option (chart just below). If the market “technically” bottomed only on Tuesday, we should be in a wave “1” (blue). We won’t know we are until we get a deep retracement for a “2.” And if we don’t get that, we could be in a third of third and I hate that and I’m sorry for missing the most tradable moment in months. But, if this is a 1, I really like the orange 3 of this one tagging the perfect fib for a 3 (1.618) but I don’t see any good touches to indicate that orange 5 (of blue 1) is done. We smooshed through the 61.8 fib near the close, and that doesn’t look right. Usually they touch more closely and reverse. So it’s possible that this will go to a higher fib on Monday before beginning what should be a multi-day, 3-swing pullback. This has the benefit of retesting 4000, which a bullish market should do. If we have a massive gap up, it would call this into question.

SPX

If the market did “technically” bottom on Tuesday, and we get a deep retracement, then all will be forgiven because we’ll get a good entry close to the origin of a long bull run. It can go deeper than the orange box, too, it just can’t go below 3909. If it does that, the bear is back.


So, let’s see what happens.

I have a feeling that much of my work this year hasn’t been of great help to folks and I would like to apologize for that. Early in the decline, I was more or less expecting it. But I hated just how quickly everyone and their mother assumed we were in something really big. I really can’t shake the contrarian bone in me. And they turned out to be right, as things deteriorated faster early in the decline than I was expecting. And the June drop and terrible inflation print convinced me that the market was probably in much worse danger than I thought all that bearish sentiment could prevent. And of course, it was right around then that we haven’t done anything particularly bearish yet, and now, to the contrary, we’ve even had the largest bullish candle since November 2020.

So yes, I’m twisted around a bit. I don’t know why everyone could be right about anticipating such a deep decline (that’s unusual). And now I don’t know why we wouldn’t at least go in for a greeting with the 250-week EMA since it was so close (that is also unusual). I’m sorry for that. What has been making the most sense to me has not been working well. It’s not always quite like this. I enjoyed the COVID crash from top to bottom, I enjoyed—initially—the rally off that low, was overwhelmingly bullish for 2021, and got a lot of that right. But, this has been one of those times that I don’t have a clear grasp of the structure. The rally off the COVID low, by the way, is almost certainly corrective, and it didn’t make a lot of sense to me then, either, in much the same way as this structure has been perplexing.

So, I hope I can figure it out soon. I would feel better about becoming bullish here—with conviction—with a Fed pivot. And I don’t feel like we have that. I also really hate most of the structures on most of the stocks. I can’t find a good bottom anywhere. And yet, I don’t want to be wrong for a thousand points before I figure that out, either.

I’ll keep looking, and hopefully I can get a better grip on things soon.


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