Option #1:
I like the structure pointed out earlier. And on that interpretation, we should see something like this (a chart from earlier today):
If this is an ending diagonal AND this is also the top of Orange B, we should begin to fall in Orange C, getting us to 3000 or so by the end of September or so.
Option #2:
But until we actually see a big reversal that sticks, the bullish view remains on the table, too (I have taken this chart from that article):
If the CPI comes in super shocker low, I can imagine the market reacting this way, I suppose. For this, we will need to recapture the 250-day EMA with volume.
But there are some reasons I am not perfectly happy with either.
Critique of the bullish view is:
- I see no evidence that the Fed is our friend.
- Most stocks (like Apple) do not look like they’ve formed an impulse wave in their most recent rallies (chop and overlap throughout).
But we can also critique the bearish view above:
- I am concerned about the general consensus right now that this rally will fail here.
- I am seeing large bear accounts getting hundreds and hundreds of likes on top calls here.
- This can be a contrarian signal.
So what in the hell can we do? I have developed one alternative thought.
Option #3:
What if it is going to fail, but it’s not a matter of if but when? So I’m going to throw this thought out there, just so that if I feel I need to, I can point to it later and you won’t be ambushed by the thought. This way you’ll have time to consider it as a possibility and take action if you feel you need to, without me surprising folks with a radical thought you haven’t seen before.
What if this is an ending diagonal, but it’s not the “technical” top of Orange B? It’s not an unreasonable proposition. After all, the best way to count the decline from the all-time high to Orange A (on the very bottom left of the chart where the red arrow is) involves ending it on the June 14th low, and not the June 17th low. The fib relationships at the June 14th low are superior (and the counting from there is better, too). Now, because of that, because Orange A is “offset” from the actual low, it makes it possible for Orange B to also be offset from the actual high. Oftentimes, there is a mysterious symmetry that creeps into structure. The only requirement for an ending diagonal is that it retraces the diagonal. And so if we put those two thoughts together, we may end up with this:
Still the same thought eventually, but maybe they do burn and destroy everybody for this entire options cycle. Let’s consider what this will do:
- All the top callers calling for a top now will be wrong in the short-term because we may go up again to complete the ending diagonal (if it is one).
- But then when we do drop, perhaps everybody piles in (after getting burned once already), only for the market to not generate a good impulse wave down, but something ugly and jerky instead of fluid, a B-Wave (Green) instead of that Green “1” in the chart at the beginning of the article.
- But since we’re moving down, everyone keeps piling in, only to have yet another rally for Green C that takes us almost right back to the highs again (but maybe not quite to the high).
- Everybody dies over a week or two, and just when they finally all throw in the towel, then the hammer drops.
So, that’s the thought. No idea if it will play out. But, it lets me keep the good-looking ending diagonal, and it lets me be right about this being a bear market rally, but it allows time for the consensus that this is going to fail now to become confused. And I think there is a good chance that we may need that.
Now you’ve seen the thought: and so IF we do drop from this as an ending diagonal would but don’t form a good looking impulse wave when we do, I may adopt this as my expectation in the coming weeks, and you’ll at least know what in the hell I’m taking about if I do.
If we sink in an impulse wave, forget this thought. If we launch up off the 250-day EMA, forget this thought. But if things start becoming muddy and ugly, not really doing either of those, we may simply need more time.