I Lied: One Final Idea

One thing I can say for sure is this: the structure the S&P 500 has created off the all-time high is among the most complicated it has created in many years. It would be impossible to envision a structure like this in advance of its unfolding. It’s certainly not any kind of impulse wave, so ignore that wherever you see that idea. It’s clearly corrective in nature.

The best one can hope to do is to take it a day at a time, and to try to use other things to supplement the ideas (like market internals, etc.).

Looking more closely at the idea just posted, it strikes me as perhaps the most likable. I like the symmetry. And I like that it makes the whole thing dominated by “B-Waves,” first the looong Primary (pink) “B-Wave” from April until June, and then that followed immediately by the yellow “b-Wave” from there until the latest CPI print. “B-Waves” are by design meant to destroy. And after the COVID crash and subsequent markup that drew millions of people into the markets, its fitting to enter such a destructive pattern in which 90% of the time, we’ve just been in trappy “B-Waves.”

Alright, so I like it. But: there’s one thing that makes me not want to be too hasty here. In the last post, I found a fib at today’s low that could justify it as being complete. But, I notice that the yellow “c” looks “small” when compared to the yellow “a.” And they don’t look symmetrical. And everything else looks very symmetrical. And so if we want to make this symmetrical, we need one more whipsaw so that we have 3 big pink waves here in yellow “c” that will match the 3 big pink waves found in yellow “a.”

And if we do that, and if they are symmetrical, it would look like this:


The best possible relationship between the main legs of a correction is 1:1, and we need to go lower for that. So, let’s ask ourselves, would a run to 3900, then another crash to 3525 hurt the most number of people or nah? Are people actually bullish enough to be trapped in pink B? (or are people bearish enough that the squeeze to that point will harm them?) And will people get bearish enough again the drop to pink C that it becomes a real trap? If so, this can happen, and it’s a nice, symmetrical structure from top to bottom this way.

So: if we do get a rally, we need to be very careful around 3900, lest we become trapped at the final “B-Wave”.

The good news is this. These structures exist in history. They happen after big markups that draw everyone into the markets. They destroy everyone, driving them back out (notice how quiet Twitter is when compared with a year ago?). And it’s so that no one is present for the next markup. That should mean that the economy and the world in general is going to turn out alright in the end, maybe after not too much longer. Maybe a war ends and the stress on our economies is relieved and we get back to our normal lives a bit more.

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