Weekend Market Commentary: Let’s Look at Several Possibilities, Ranked From Least to Most Probable

A quick recap:

  1. I had been looking lower (here),
  2. Then I suspected we would rally (here),
  3. And then I worried that 4500 as resistance could lead to a drop (here),
  4. And since then I have looked at a couple of technicals that could support a bounce (here and then here).

So now what?

I will present 3 possibilities (2 bearish, 1 bullish), listed in order of least probable to most probable, in my present opinion.


The bearish possibilities certainly can be justified here:

  • Local price action looks like shit
  • “Don’t fight the Fed” is a reality we all must face, and they’re certainly jawboning hawkishly
  • The news flow (e.g., Europe, China, inflation) is not optimistic

A) Bear Wedge Possibility

This bear wedge possibility remains possible here. It is the most bearish possibility because it assumes that the highs are in. When I originally floated this idea, I did so because during the last rally, it seemed to me that sentiment was much, much too bullish and that not enough people were taking the risks we face seriously enough (for instance, the yield curve inversion). I now believe this is the least likely possibility, and I will explain more on why below. But, if the highs are in, if we are replicating the Dot-com top, and if we rally this week from these present lows, this structure remains possible. We would expect a 3-wave move for orange E of pink B before collapsing in a huge, multi-month (almost certainly over a year), 5-wave decline, a true bear market bloodbath.

SPY

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Note: When articles are first posted, 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 months), I make all of the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, Tier 1 members ($20/mo.) get access to the articles, Tier 2 members ($35/mo.) get access to those, plus counts on about 20 other instruments, plus Discord server access.


$RSP Triple Nested 1-2s and Head and Shoulders Pattern

$RSP presents us with a beautiful head and shoulders pattern that can be counted as a nest of ones and twos. Watch for the neckline to break.

RSP

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Note: When articles are first posted, 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 months), I make all of the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, Tier 1 members ($20/mo.) get access to the articles, Tier 2 members ($35/mo.) get access to those, plus counts on about 20 other instruments, plus Discord server access.


Things I Like and Things I Don’t

I’m not going to be quite as ridiculous as looking for a reversal for days and then immediately changing my mind the moment we get it, but in an effort to remain as objective as possible, I want to lay out evidence I see for both cases (a top is in vs. we need another high).

1. I said that my gut told me the “bull flag” was going to fail, and it did. That part’s great.

2. Surprisingly little technical damage has yet been done. Lots and lots of EMA support here on various timeframes:

ES

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Note: When articles are first posted, 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 months), I make all of the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, Tier 1 members ($20/mo.) get access to the articles, Tier 2 members ($35/mo.) get access to those, plus counts on about 20 other instruments, plus Discord server access.


In the Event That We Do Not Want to Be Stupidly Bullish, Here Is an Option

I wish I had a grand conviction. I’m torn: price says up (here’s that count), but my bearish instincts are screaming at me to be cautious. I have to believe the madness will eventually end. I really would rather it be sooner than later.

Here’s an alternative we can keep in mind to prevent us from becoming intoxicated by price alone.

I noticed on $RSP the other day that the weird low we put in formed a beautiful triangle. See where I have the primary (pink) 4.

RSP

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Note: When articles are first posted, 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 months), I make all of the work public. To gain access to my work when it is produced, please consider becoming a patron. More information may be found on my About page and on my Patreon page. In a nutshell, Tier 1 members ($20/mo.) get access to the articles, Tier 2 members ($35/mo.) get access to those, plus counts on about 20 other instruments, plus Discord server access.