Charts 8/9: Setup now for a huge sell-off

We closed right at the perfect spot for a gap and go in the morning.

We could see a 4-5% sell-off tomorrow, retracing the entire five-wave advance from SPX 2328!  Relief would follow next week, at least until mid-session Wednesday, when we rollover again.

SPX 30D

The big picture, including the debt-ceiling market crash in late-September (and face-ripping rally into January):

SPX 2Y

Charts 8/8: Bear sighting

It looks like that diamond-pattern that held up for several weeks morphed into a rough ending-diagonal shape and ... ended.

Awesome price action with a key-reversal day, selling off on heavier volume than we had on the rise.  We are now off to the races.

The next order of business is to drop 200 handles to the 2280 level on the S&P 500.  The sooner we get the VIX up to 20, the sooner that the leveraged volatility shorts will be crucified.

The Fall crash gets going in later-September when the government hits the debt-ceiling wall and commences shutdown.  I am very much looking forward to this waterfall -- will it stop around the earlier lows around 1800 SPX, or plummet all the way to the 2007 (year) high of 1576?

SPX 2Y fall crash

Good luck to all ... bears!

Diamond-top in progress on /ES, SPX

It's a picture-perfect diamond pattern, so far.

Will it break down (top) or up (continuation)?

/ES 1H diamond

Well. What do we make of this nonsense?

Thank you Bryan for the title.  The reversal off the 2484 SPX high looks decent so far.

If we've topped, then the first order of business will be to retrace -- quickly -- the 5-wave move up from the April lows, followed by a bounce.  If I have drawn the channel right, you can see how the close today tried but failed to regain it.

SPX 60D

If 2484 was a significant high, then it begs the question whether it completed a W3 or a "C" wave.  There clearly is a 5-wave move up since the Brexit lows (1991 SPX) on the chart.  The big question then is whether we can look down from these heights, or if we have another 4th wave correction and 5th wave rally left in the tank.  IMO, all of the major legs since the 2009 (year) lows count as triplets, ABCs.

If 2484 SPX marked the end of C of 5, then we can revisit the Brexit lows this fall like so:

SPX 2Y

If 2484 SPX marked the end of a W3, then the .382 retrace of the 1991-2484 leg is 2295 SPX; we will watch for this carefully, because a 5th wave similar to the initial bounce from the 1810 lows would bring us very close to a final high target of 2600.  We have to keep this possibility in mind -- especially if we find ourselves near the 2295 SPX level (and a pink trendline in the chart below) into September opex.

If we are looking for 5 complete waves up from the 1810 lows, and especially if the Fed rolls over at the September FOMC, then E-W suggests that we could indeed approach the 2600 level in a 5th wave up, as shown here with the heavy blue line.

Bullish alt: Fed flake-out blow-off