Bear Flags and Frothing Bullishness: Local Structure on $YM

I’m getting about 20-30 comments every day saying things like this ad nauseam: “Christmas rally,” “You’re early, bro,” “Too soon,” “Not yet,” “Patience,” “One more high, bruh,” “5000 first, then we drop,” “Dude, your timing is off,” “b-but the Fed,” “b-but corporate buybacks,” “b-b seasonality” and on and on and on and on.

And yet, we sold off sharply at the highs (a warning), $JNK and $OIL both look like shit, and we’ve had some successful bear flags of late, which I haven’t seen in a long time. We had a nice, big one on $ES that did just what we like them to do. My members are also watching one on $RTY (here), and now we even have this bear wedge on $YM as well:

YM

I have rarely seen so many people in such a froth to get in long at any price in my life. Give me some bullish structures and I might, at the very least, consider it. Until then, nah thanks.

Divergences Across the Board

One of the reasons I began to doubt the bullish count and lean to the bear count is the mounting divergences we have formed across all US indices (on the hourly, which is suitable for this wave degree). This usually signals that we’re ending a move, not that we’re in the middle of it, nor anywhere near the beginning of it. In order to break these divergences, the indices would need either to accelerate up from here (virtually impossible given the run that’s already been had), or to consolidate quite a bit before making another go. But even in the latter case, I wouldn’t expect to see the big RSI peaks where we see them, so I think the whole move is more likely ending rather than preparing to continue (though of course I can be proved wrong on this).

I will present the divergences here for you. They’re quite sharp and well-defined.

$ES:

ES

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$YM Larger Inverse May Target Somewhat Significantly Higher Prices

The smaller inverse head and shoulders on $YM has already played out (noted here), but there may also be a greater one that has developed as well, noted below. If this plays out, it would match the similar structure noted on $ES back here. It feels aggressive to point these out, but I can’t unsee them.

YM

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The Two Questions at Hand

The two questions at hand, it seems to me are:

  1. Are the markets bullish or bearish? I.e., have we completed the correction, or no?
  2. Where are we in those structures if we are one or the other?

I cannot get over the fact that $SPY looks to have generated a triangle while coming off the 9/30 low (green arrow). If so, we should be in a correction “up,” i.e., we will turn lower again and challenge the 9/30 low. If this “we’re in a b-wave” scenario is true, then from that triangle, we need to make a 5-wave move up (that’s the “c of b,” which needs to be 5 waves). There are two options: the 5 waves are done, or they’re not. If they’re not, it might look like this:

SPY

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Just a Fun Tidbit for You Guys on the Dow

One way to look at the selloff in the terms of the $DJIA is that it was checking in on an important trend line, the one drawn on log from the 1929-2000 peaks.

So far hard bounce off of it, so if it had been asking the question, “Are you sure you want to be doing this?” the answer so far has been, “Yes.”

Twice now.

DJI