I want to zoom in to today’s action.
Because the initial advance (the orange “a” coming off the low) appears to be in 3-waves, it favors the ultimately bearish case discussed earlier. It is always preferable to see an impulse wave off a low (a 5-wave advance) instead of a 3-wave advance. If this is a “corrective” rally, it doesn’t mean we’re going to drop like a stone right away. We may fill out a bear flag into next week:
And I would like to correct the fib I identified below if we do end up heading lower. I suggested in the last post that we may only just take out the June low, but I had my magnet on the wrong candle. Correcting that, the wave balance below does not take out the June low, as it is near 3700 (not 3600):
This is of course all contingent upon us not seeing a powerful rally (and we might). But, in a way, the bulls will have been right about the June low being the low, but it may not be fun as the majority of the rally will end up being retraced. And the bears will have both a win and a loss in their columns as well, as the rally will for all intents and purposes fail, but it’s probably not going to ultimately go nearly as low as they might want (they’re going to want that green trend line strike way below).
What we do know is: we still have the “market has never topped prior to a rate hike cycle beginning” and the sentiment at the June low was consistent with a low that really endures. And we also know that this latest rally involved a breadth thrust far, far greater than any we’ve seen in any bear market rallies in the dot-com bust, the GFC (or others). This is a major reason for my skepticism about my previous conviction of a move to 3000 (and eventually even lower). When that information came to me, I’m listening to it.
So something like this satisfies all criteria: the June low sticks, but not before it scares the shit out of everyone first.
I want to take a moment to express my thanks for those who have stuck around during the difficult market. When my Patreon renewed today, I discovered that a full third of people have left. That’s disheartening. And I’m glad those of you who have stayed have stayed. It’s hard for me to be strongly convicted to a major market structure because there is a lot of conflicting data: on the one hand, it does feel like the Fed is tightening into a recession and that we’re doomed. But given the breadth, the strength of the rally, the speed with which sentiment rushes to bearish extremes, these are all symptoms that we may be very close to a low that sticks for a very long time. And so I do adjust my interpretation as we go along, and I hope you can also see how I tend to trade around the uncertainties (stepping in and out of trades, taking strangles selectively, etc.). I’m also not much a day trader, and prefer multi-day setups, and I think there are folks who want to know: “We’re going right to that level, and now,” and it’s not something I’m good at, and prefer the work that I do. But I can see that it’s not to everyone’s liking, as so many people have left, which hasn’t happened before. I suppose that is to be expected in volatile times. But at any rate, I hope the work is of some value to you and I just wanted to express my thanks to the survivors.
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