The $IWM Superstructure

It’s always bugged me that the Russell was able to breach its downtrend line several times, but then also fail several times after doing so.

And, in the end, looking at the whole thing that has developed, it is shaping up to look a lot like a giant triangle, and this should be a continuation pattern, I would think.

I have noted target where we may find equal legs.

IWM

Now, that said, if it is a triangle, it doesn’t have to be a continuation pattern. They usually are, but not always. And, this gives us a convenient stop, mental or otherwise. If it goes above the upper green trend line, i would become suspicious of this interpretation.


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


And Here’s a Look at the Bearish Scenario

I have looked at what I would like to see if we’re bullish. Now let’s see what things look like for the bears.

If we’re bearish, we need this to be either a 2 or a 4 or something—some corrective rally. And the best way i can see for that to happen is no different than how I have been: it almost certainly must be some kind of expanded flat. One issue is this. If we’re actually just squeezing the bejeezus out of shorts before a plunge, we’re not by any fibs here at the moment:

SPX

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Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


A Glance at Futures

With the poor inflation data coming out of Europe, we see some equity weakness this morning combined with renewed dollar and yield strength.

I will note a couple of things.

On the Russell futures, we remain above the breakout trend line (though if we open here, the cash session will—once again, ffs—be just under its:

RTY

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Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


A Look at $RTY

Just pointing out where the Russell futures are right now.

We’re right at the downtrend line now. If this is a retest, I would love to see it find support here, but things look grim. I don’t see a catalyst for a rally. We have University of Michigan Consumer Sentiment in a couple of hours, but for all we know, that might make things worse and it doesn’t look like it’s going to come in time so save this trend line. A bounce here would make sense if we do bounce. If not, we will probably target the prior low (green arrow), I would have to suppose:

RTY

The cash index is going to open already under its trend line.


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


A Quick Look at the Structure That Is Forming on $RTY

Just to emphasize why I am on high alert here. I posted this in the Discord today, but forgot to mention it in an article, so let’s discuss it for a moment.

Much like the S&P has not broken its rising supporting trend line, the Russell has not broken its relevant trend line. And, at least right now, if this doesn’t fail, it looks like a successful retest. And, a rally from here will give this the unmistakable look of an inverse head and shoulders pattern (you’ll see the same on SPX).

Things could still break down, to be sure, but we have ingredients for a rally and I don’t want to ignore them. If we break these trend lines (here and the one on the S&P), things will change, but we’ve also had a lot of opportunities to do so and haven’t, so I’m open to various outcomes right now.

RTY


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


The Long Weekend Review

There are many possibilities available to us, and too many mixed signals at present for me to be strongly convicted toward any one outcome. This weekend, I will discuss alternatives and discuss technicals on a variety of instruments. It will mostly be a display of information. From that information, I cannot conclude whether we’re bullish or bearish because there’s enough pointing in both directions.

My plan over the coming week is to try to take things one day at a time.

In this lengthy article, I will discuss evidence that points to bullish potential, evidence that points to bearish potential, and some things that seem like unknowns.


Some Bullish Evidence

I want to first discuss breadth. During the last rally, which I expected would fail, we had a rare breadth thrust. The rally was bigger than I expected, and I know that irritated some people that I didn’t directly call for that (though I hope my having shown how I profitably traded around the uncertainties has been helpful). And yet, to call for such a rally would have been to expect what I was not expecting: I believed we were in a bear market rally, and those should only go so far. That one went farther in some respects. And despite that, we’ve now given perhaps too much of that back, which goes back to sort of vindicating my original view. In other words, in order to get all of it just right, one would have had to call for a bull market rally in a bear market, and I’m not sure how I could have done that, or why I would have done that.

Let’s discuss exactly what happened with breadth. At the June lows, less than 25% of the stocks in the S&P 500 were trading above their respective 50-day simple moving averages (it was in fact much less, but I want to focus on the statistic—but for those keeping track, it fell below 1% on 6/17). During the course of that rally, that percentage rose sharply to more than 90%. That is a remarkable statistic. And guess what? Since 1942, 100% of the time, this has happened only after the lows were already in. That is to say: the market (at least in the last 80 years), has never done this and then gone on to make new lows.

And furthermore, during the course of the rally, the length of time the S&P 500 spent above its 10-day moving average was quite long: 23 consecutive trading days. And coming out of a low that was at least 20% off the all-time high, since 1942, this, too, has a 100% track record of only happening once the lows were already in. That is to say: the market (at least in the last 80 years), has never done this and then gone on to make new lows.

I hope you can see why, despite originally expecting the rally to fail, I was capable of accepting this evidence, which inclined me to become open to exceptional bullishness once we had a pullback off that August high. This caused me to exit my long-duration short too early, and to begin looking for a bounce a little too soon (though both turned out ok in the end, as leaving some profits on the table is far different from taking a loss, and catching the rally off the low was still delicious enough for me). I can’t possibly catch every inch, and I caught enough of this in the end.

But that renewed openness to a bullish bias has now been cruelly jeopardized, as this decline has now become severe in its own right. And in fact, it has been accompanied by a breadth collapse, one that threatens the bullish case, and we can all see that on the chart regardless just by looking at the miserable price action since Jackson Hole.

So My Good Lordy. If you’re someone like me who prudently attempts to incorporate market signals into your trading biases, then you’ve had quite the hard time here calling the shots. And it feels like we’re simply at the mercy of spastic Fed messaging:

SPX

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$SPX Update, No Real Changes

With a slight recount, I have good fibs at today’s low. I would like to see a rally from here.

Ideally what I would like to see is depicted by the speculative path below. I would like to see a rally back to the neckline that—by the time we get to it—only looks to be in 3 waves. That could be the orange 1-2, followed by the green 1, for instance. A pullback into a close up there would be beautiful, setting the stage for what will look like an a-b-c up, to be followed by a crash, but will instead be, as I believe, the nesting leading to a 3rd of a 3rd to the upside (for the green 3):

SPX

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Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


Crack Cocaine Update Hour

Quite the pump. We are back at the channel noted yesterday (here). Given the excellent fibs we had at yesterday morning’s high, I expect that high to hold. I suspect we are in some kind of “b” wave of as of yet unknown degree and so I expect us to head lower and take out yesterday’s low at some point in the next few days.

ES

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Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.


$RTY: Granular Count (For the Geeks)

This post is a summary of some granular thoughts about wave counting the futures market. It’s a little geeked out, so look away if that’s not an enticement to you.

But, I see something interesting, and it’s an opportunity to discuss an element of Elliott Wave Theory for those interested in honing their skills. It’s a rare wave count, that doesn’t come up often, so it’s worth pondering over.

I’ve had difficulty counting the futures markets because of the CPI spike, so I’ve been ignoring that and focusing on the cash sessions primarily. But, I might have something now.

  1. The only parts of this structure that count particularly well impulsively are the first part (the five blue waves leading to green 1) and the latter part (the five red waves leading to orange c of blue b).
  2. So, on the one hand, were we bullish, we could try to use those two 5-wave structures to form an a-b-c down, and call this a corrective pullback.
  3. But I see few reasons to be bullish here, as the macro-environment is deteriorating rapidly.
  4. And so we can derive what I have below, which makes this a “running flat,” which is uncommon. I will let you examine the chart, and I will add some further comments below it.

RTY

If this is a running flat (I don’t know that yet), they’re quite interesting because they’re corrections that move in the direction of the trend, and that is what makes them unusual. Usually, the market trends in a direction, but then corrects in a counter-trend direction. In this case, it should move up. And especially if this is a 2. In that case, it should sort of move up a lot. But as you can see—if this is a flat, and if it is nearly complete here—the end of green 2 has corrected only to the end of green 1. You see how that’s bizarre? Normally, a wave 2 will retrace 50-61.8% into wave 1, and this can’t even barely get back to wave 1.

Now why would this happen? In this case, it would mean that the market is actually so bearish that it has to correct while still galloping down. Ha! It would mean that that’s just how much of a hurry it’s in to go down. What makes matters even worse (for those inclined to be bullish) is that it looks like a corrective pullback, because it’s so choppy. And today’s rally now looks to be impulsive. And so it’s very easy to count this as 3 waves down, followed by a new bullish structure up. But in reality (if it is a running flat), the rally today is the “c-leg” and that should be an impulse, and the whole thing can now be done.

Now, this needs to prove itself, and we need to see a wave 3 down in order to get that proof, but if we do, you can use this post to gain some insight into a relatively rare pattern.


Note: When articles are first published, most of them are made available only to my Patreon supporters (I do try to publish some public posts on occasion). Over time (usually after a period of a few weeks or so), I make all of the work public. To gain access to my work when it is produced (or to join my Discord chatroom), please consider becoming a patron. Note that there is a 7-day free trial period. More information may be found on my About page and on my Patreon page.