And This One’s for the Bears

Now, my preferred view is for us to smoosh sideways for a while, then get a big rally that eventually then fades. Why do I like it? I like it because it’s not too bearish, not too bullish. And sentiment is terrible here, and it’s preferable to see some of that worked off before we resume another leg lower.

That said, just because I would prefer to see some of the bearishness worked off, doesn’t mean I’m going to get it.

And I think this part is important: as counterintuitive as it may sound, if we’re bearish right now in the short-ish term, I think it will be bullish eventually, per my preferred count (see the orange text):

SPX

However, if we don’t stay “low,” and even sideways for a bit, the evidence of an actual accumulation will not be present. And accumulations need to stay “down,” and take some time because it means smart money is buying at lower prices.

But if we don’t do this, and get bullish right now in the short-ish term, I think it could be extremely bearish. Why? Because it means we’re squeezing out the bears and the market isn’t being accumulated and that’s not good. Not good at all. It would incline me to some really dark stuff, like this (and see the orange text again):

SPX

So in other words, if we form anything like a triangle here (the Green B), and rally out of the top of it (the Green C), it would look a lot like a 3-wave advance after a 5-wave decline (an orange 2 coming out of an orange 1). And that’s just awful. That is absolutely a setup for a crash, because we could be entering a third wave down of multiple degrees.

So: if we fall a little on, say, Monday, but don’t break today’s lows, and start to rally, I will dump a lot of puts and I will take some calls briefly (down there around the “blue e”), and see if we go to 3909. Three things line up exactly there (all noted on the orange line in the chart above). But a rally here coming out of a triangle (if this thing we’re in becomes one) is not such a good look. It would look exactly like a “one down, two up,” and if we’re nested (see the pink 2 up the top), then a thousand+ point drop is on the table. So we want to see prices stay low, keeping people bearish while they accumulate. If we rally because everyone breathes a sigh of relief on the Fed pivot/pause narrative, then I doubt this has been accumulated because this just hasn’t had enough time. And that’s not good, in my opinion.

So, let’s keep this thought in mind, and let’s stay prepared for many alternatives. I won’t rule out any alternatives until I have to. And until we actually see an accumulation—people need to stay bearish and sell into smart money—, we can’t rule this one out.


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