Saturday, April 12, 2014

Charts 04-11: What would a fall crash look like?

I really want to be more excited about the violence and carnage we have seen in the tape lately, but the evidence is there for any honest bear -- VIX is restrained and we are just not seeing the fear and damage we need to at this point.  Wave 3 is wrapping up ... and it should have extended 1.618x the 60pt W1.  This is telling us something important, that it is "corrective".

Yes, new highs are ahead -- I like 1918 SPX in mid-May.

But take a look at the tape for the past week and get used to what a no-bid market looks like.  Sure, it's the shitty beta momo stocks getting hit now, but this is what will happen to the broader market later this year.

We should head a bit lower this week, to trendline support in the 1790s, after we fake north on Monday and early Tuesday.  I'm looking for a bottom just after the April Full Moon, followed by a sharp rally.

We are entering a period of numerous turn dates, both Bradley turns (if you believe in these things) and even a McHugh phi mate turn next month.  The last Bradley turn, April 6, was a direct hit.

About that "fall crash" -- here's the problem.  If we are indeed in an ending-diagonal pattern, with one more good rally ahead of us, then the completion of the rally, the reaction from it, will quickly retrace us back to the 1560 1646 area on SPX.  I think this will happen into the 7/16 Bradley turn date.  It looks proportional.  This would most likely be a 5-wave "A".

SPX 04-11

The retrace from this steep drop sets us up for a panic plummet hellish historic meltdown in the fall, all the way back to the 1000s SPX.  It would key off the September FOMC.

SPX 04-11 3Y

Should this play out, I think I will exit the markets after November.  They will go lower, I believe, all the way down to the trendline between the 2002 and 2009 lows, but I don't know if I wish to trade that late cycle.

I will be more interested in finding good farmland in western WA and securing the safety of my extended family (solid Chicago Czechs) in early 2015.


Bryan Franco said...

As most will know, things are starting off a lot like March '00. Without any charts in front of me at the moment, i believe the S&P 500 spent the next 5 months grinding back to a closing high, but not an intraday high. The NASDAQ came nowhere close, of course. Your analysis is consistent in this repsect, if we can make the assumption that the "parts comprise the whole" as far as an analogous tape goes. What i am saying is that while i would prefer a 5f or deep wave 2 on the leg higher, i can live with marginal new highs.

Permabear Doomster said...

Q. I'm bemused, how can you expect a new high in mid May?

Seasonally, that goes against EVERYTHING that has happened in the past few years.

Bull maniacs face a concrete wall of resistance in late April/early May.

What about the weekly index cycles? The last two candles are bearish as hell, and yet you are now broadly bullish. I just don't get it.

Everything right now is pushing lower, and of all people, you're now touting new highs.

I've started to note in the past day, but go drag up an hourly chart of May 2010...and tell me there isn't an interesting analogy there.

*any thoughts of <1760, get dropped if 10EMA is broken back above.

Regardless, have a good week.

Christian Gustafson said...

Here's a good summary of arguments for an imminent near-term bottom.

I trade and watch UVXY as a decent fear indicator, especially since its leverage gives it more of the umph of the VIX. It should be gaining 25% per day now, but it's languishing.

That, and McHugh. He continues to insist that we've got one more high left ahead, and I've come around now to agree with him. When I re-drew the E-D on the charts, it started to make more sense.

What I'm arguing in this post is that the E-D itself serves a dual purpose:

1. It's a terminal pattern for the rally, with clearly-marked areas of support and resistance.

2. It's a target for the next leg down, "A", as the tape will retrace an E-D once it breaks down.

"A" down to the 1560 area points to a "B" that is a retrace AND POTENTIAL KISSBACK of the old channel. Into September FOMC? Imagine that.

And that lets you time and estimate a market crash, the "C" wave, for realz.

Bicycle said...

what's the rush? We can easily spend all the way to October to get to 1550.

Then everyone will be saying it looks like 2008 again (like they're saying it looks like dotcom crash now), and we are going to crash in October.

That is exactly when we will blow off north to 2300.

Summerfall 2015. That is when you want to start thinking about hide yo kids hide yo wife 'n hide you husband.

“The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger - but recognize the opportunity.” -- Richard Milhous Nixon

Christian Gustafson said...

Summerfall 2015 is when the $USD goes into the hopper for hot dogs, Bicycle.

IHMO YMMV don't shoot your neighbors, usual disclaimers apply.

Bicycle said...

Geez. See you at 2200 folks.

T.Berry said...

will be there with you bicycle..enjoy the ride and great calls btw been nailing it