*This close* doesn’t mean I’m there yet, but I will be if a powerful rally emerges from here.
I know you’re not going to like it, so definitely fade me on this lol.
But, this all reeks to me of a lasting bottom: IF we can actually summon a rally probably from here. I wouldn’t want to see much more weakness here. I’ve already discussed much of this before, but sentiment doesn’t seem right for a steep decline, that volume spike will haunt me forever, and some technicals are poised to work in unison.
This is all still a big if. I already noted earlier the dollar and yields. IF they both turn, what can it mean? The dollar can enter an outright bear market from these levels. I don’t know if it will, but that chart speaks to me. A breakout above that trend line will be a disaster of course, and we’ll likely crash. But it hasn’t broken out, and if it reverses, I simply want to be psychologically prepared for the occasion.
The economic data coming out is improving, consumer sentiment didn’t meet forecast, but it was an improvement over the last reading nevertheless. This has a good track record in history of leading us out of recessions. I remain open to the possibility that we briefly contracted, and that we’re expanding again now. That doesn’t mean we’re not going to contract again later (I’ve discussed that before, too).
Now this part is weird, maybe more for the geeks. But, when we have a “single structure,” the fibs usually ping pong around off each other. But what’s been odd with this decline, is that none of this structure:
bears any real fib relationships with any of the structures leading up to it all this year. That can generally mean one of two things:
- The structure is incomplete, or
- It’s a new structure.
Problem with the first option is that, honestly, I think we’re moving too slowly. If we’re in a very bearish move, it needs to take everyone by surprise. A 1-2, then a drop for the 3 that few get to enjoy. We sort of started that way, that big sudden drop. But we should have cut right through the early September lows in a single motion, gapping through all that trend line support, I think. Not gapping to, then grinding through this area here. If we’re in a very bearish move, like this count:
This move should devastating, and though it’s not that pretty right now, our momentum is way too low for a third wave. Now everyone’s short. And everyone misses 3rd waves, and I’m skeptical to my gills right now that we’re in a 3rd wave.
This feels far more like an A-B-C, and there’s a good fib at today’s low:
Now everyone is short, at the bottom. That’s what we want to see.
So, if this price action doesn’t bear a fib relationship with the stuff from earlier this year, but is a completed A-B-C, then what the hell is it?
We know we can’t count the structure off the June low as an impulse wave, because there was never an Orange 4-5 to complete a 5-wave advance in Pink:
However, boy I tell you what, if we just focus on everything from the July low forward, this feels a hell of a lot like a big 1-2. 5 waves up from that low looks great, 3 waves back, panic and certainty of lower lows right at the bottom of a 2, right at the spot folks should be buying hand over fist (if it is a 2—I don’t know that yet, this is me speaking hypothetically):
An interesting feature of this is the target for the pink 3:
That target is literally in the wick of the January 4th, 2022 high. Perfect fib targeting the all-time high literally almost to the penny.
So anyways, this would explain sentiment, a rally would clear up this messy structure to our left (it’s too choppy for a “real” bear market), and the other things I’ve already mentioned before. This would explain a dollar reversion, bond yield reversion, etc., if those things materialize. And it would harm a lot of people, too, as folks are plenty bearish here and they would be slow to react, I think.
We now have five open gaps above us. That’s a lot. Go check the dot-com and GFC bear markets. Very few gaps. Some gaps showed up at the lows, but none coming off of highs like this (and those at the lows were quickly filled as we soon entered bull markets thereafter). I’m suspicious of all of this.
And let’s check in on the Russell. He tends to lead us out of lows, and off of highs. This breakout of its long-term downtrend, despite today’s initial plunge, remains intact now:
We poked right back up above that trend line again. So, think about it: if it was a fake breakout, it shouldn’t have been that big. And what are the “small” parts in this? It’s these two drops back below the trend line that are “small” and “brief.” That makes me think the two drops (the “head” and now the “right shoulder”) are the “fakes.”
In Sum: if we rally here—big if until we see it—we may be looking at a huge market turn going on. I’m open to it. I’m not married to the idea. But there’s enough evidence on the table that can make it a possibility.
I keep waiting for a Bitcoin plunge. And while it’s weak here, yes, it’s done nothing but give me three higher lows since June. Things might be far more bullish than we might think. I know that when it is time to buy no one will want to, and that might be now. We will have to see. We get a big rally next week, we might not stop so soon. Just saying it’s possible given the sum of the evidence I am looking at.
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