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I will walk through a variety of things tonight.
The S&P 500 Count
My preferred analysis remains what it was yesterday (here). I will review it again now, briefly.
I believe we may be entering Orange B of Pink Y of a “Double Three” correction. I would like to see Orange B go fairly high, even breaking the upper rail, to form a very good bull trap:
Read more “The Long Weekend Review (S&P 500, Bitcoin, Oil, etc.)”
My main expectation for $OIL has been that it will continue to decline. That has so far been working, as it’s been weak here, and specifically, I expected the rally in May to fail, and it did, as we’ve fallen about 30%. I originally expected the initial decline off the 3/6 high (now labelled Pink “A” in the chart below) to be a Pink “1,” but I changed that to a corrective “A” because the rally that came after it did not fit the parameters of an impulse wave’s correction, nor did the subsequent decline look impulsive enough (i.e., the Pink A looked like a good impulse, the Pink C did not not, and Pink B did not look much like a “2”). And my most recent analysis of it on the other counts page involved the expectation that it would still move much lower despite not being an impulse wave (here).
However, it may not and I would like to discuss why. It just so happens that the recent decline came to a spot where Pink C now equals Pink A. And if it stops here, the decline may be over. Now, it’s under the 250-day EMA, but it can do that briefly and still begin to rally again (e.g., red arrow). In addition to the relationship between Pink A and Pink C, at this same spot there is also a relationship between Yellow C and Yellow A. It’s welcome to make a new relationship by finding additional fibs at lower prices, but momentum to the downside has waned, and it’s possible that it’s putting in a bottom here. If it is, and if it’s a low of pink, yellow and purple degrees, it may embark on quite the tear, heading (eventually) to $224 (or even higher).
I’m more or less agnostic about this regarding what it could mean for equities. Bears have a good case, regardless of in which direction it heads next: if it pukes, that often happens in risk off environments, but if it rallies, it just means inflation is here to stay and the Fed will not be our friend for the foreseeable future. So it may not really matter here. But if you want to trade energy and this starts to rally, it may become bullish for quite some time again.
I continue to anticipate this outline and am open to things getting dicey at any moment. If a dirty, mean old bear put a gun to my head and made me justify a top today, here is how I would do it.
1. Though we’re a little off regarding fibs given in the “Roadmap” (we’re not quite high enough using those labels), an adjustment can improve this. By moving Green A to a prior high, more in line with the high made on the futures market, we came within 7 points of a fib strike today, and that is good enough. Also, if we’re repeating the dot-com bear market fractal, the S&P 500 came close to the 250-day EMA, but didn’t quite touch it at this point in that fractal. About as close as we did today.
Read more “Three Quick Thoughts”
I just want to organize a few thoughts this weekend. And I would like to say something obvious, something that should go without saying, but I want to make sure some folks aren’t upset.
I have been open to bullish outcomes for much of this year. Why? Well, it’s because I’ve lived through rate hike cycles before, and usually they’re not quite this bad (in fact this is by far the worst in history). And I also know that, historically, “technical” bear markets are just as common as long-lasting bear markets that go much deeper. And in April in particular, sentiment deteriorated so sharply that I became alive to the possibility that we may have been much closer to a bottom than I had at first believed possible. And so I wanted to remain open to that possibility—that the bottom could be at hand. Now I am changing my mind here in the short-term, but it’s almost entirely due to technical reasons. There are structures forming in the markets that are almost certainly very bearish. And I want to respond to those. So, I’m not trying to be edgy, or cute, or flip-floppy; I’m simply acknowledging that bear flags are bear flags until they are not. And many of these are well-defined. In fact, all year, one thing we have lacked is really good bearish structure on the way down. And now we have them, so we should pay special attention.
Read more “Some Weekend Thoughts Before the Abyss: Bear Porn Edition”
A whole raft of things I would like to see are coming together here. The shitty inflation print and subsequent drop was a brief distraction from what’s coming anyways, I think.
Here is my interpretation of that:
What were the results?
Yields, needle candle on the weekly:
Read more “Things Look Good to Me”
May still lie before us. I do not possess a crystal ball. But, there is a technical structure I am observing that may suggest a further decline ahead of us in risk assets. This article will lay out the idea in detail.
I am not here to confirm or deny anyone’s bullish or bearish expectations for the markets. I endeavor, instead, to objectively assess the situation in anticipation of its unfolding. In the spirit of that, let us summarize the merits of the bullish and bearish cases, respectively:
Bullish case:
Bearish case:
Weighing these two groups continues to lead me to believe that we are in a correction, and not a bear market. A point of clarification: when we use the phrase “bear market,” we can mean two things: oftentimes, we mean by that a long, and drawn-out decline in asset prices lasting many months or years; or we can mean a “technical bear market,” typically understood to be a decline of 20% from a recent high in a major index (such as the S&P 500). When I conclude that a “bear market” continues to seem less likely to me here given the totality of the evidence listed above, I am referring to the former sense and not the latter.
And one thing that I will be suggesting today is that I am open to the latter. That is to say: though I do not expect anything like the GFC or the dot-com bubble bursting, I am open to some further lows ahead that may even put the S&P 500 in a “technical” bear market.
To begin, I would like to look at the basic structures on $BTC. Where liquidity flows, so flows the Bitcoin candles, and it’s far easier to use technicals on a single chart like this than to try to do so on a complex of variable risk bonds or something like that.
Some general notes:
Now differences between the two head and shoulders patterns are interesting:
Read more “Extreme Caution Remains Warranted: A Strong Further Decline May Still Lie Before Us”
I believe that $OIL has completed an impulse wave to the upside. It may fail anywhere here around the orange box just above us, and if it does, I would expect it to enter the orange box below us before finding support. After that, I expect it to continue its uptrend. If such a scenario does begin to play out, I will endeavor to release an updated chart on this.
Now, I know it seems like I throw a lot of ideas around, and it’s because we’re in a giant triangle—I believe—(that’s where the upcoming “B-Wave” comes from) and it’s a volatile structure, full of uncertainty and I have to try to navigate through it on almost a day-by-day basis. And though I use many “risk signals” to help me to guide my counts, since we’re not in a trending market, I may seem like I’m flip-flopping around a lot, and while I am in a sense, it’s not been a bad strategy, as I’ve caught the basic motions of the market fairly well, though timing precise bottoms and tops is always most difficult.
What I’m going to do here is lay out an alternative that has just come to mind today based on many things I watch. I’m going to walk through all the steps so that you can see it’s been reasoned out and is not simply a whim.
Now, I’ve been bearish here, and that’s paid off, as we just gave back a big chunk of that rally in a single bite. I adopted a bearish tone on the 28th because some of my risk signals were winking at me, and we went exactly sideways and then got this nice flush. But maybe that’s all my risks signals were pointing to, for all I know.
I’ve acknowledged the possibility for us to make another push up but something helpful has happened today. There are two instruments that have been especially challenging for me: Bitcoin and the Nasdaq 100.
With Bitcoin, I first thought it was going to rally, and when it didn’t, I expected it to fail. And while today is sort of a good start, it’s not been quite what I was expecting and it’s given me a big clue. In this chart below (from a prior post), I expected a fairly significant 5-wave impulse from minor (green) B to minor (green) C.
Read more “Forgive Me for Doing This to You”
I want to add this to my list of risk signals that are creeping in to my attention.
My expectation was for $OIL to be in its 3rd minor wave (I noted that here). 3rd waves are unmistakable and when they don’t show up I stare intently. A 3rd wave of this degree should have carried us effortlessly to the big orange box above us at a minimum.
Instead, I want to point out where it stalled (green arrow). That thin orange line is the exact point where the rally from 12/20 until now equals the rally from 12/2 to 12/8. That is equal legs. To the tick. And that is exactly how we distinguish between “corrective” and “impulsive” structures. An impulse up here should have some real extension in it. A correction here would have equal legs. Also, the smaller orange box we’re in now is the 50-61.8% retracement of the prior decline. All of this means that my minor (green) 1-2 could be a corrective A-B instead.
Now, if this gets off the mat and rallies really hard, so be it. But until then, it still needs to prove that to me.