Friday, June 6, 2014

A second 3PDH pattern now in play

Volatilites are getting bloodied again, but we won't go anywhere near them until VIX gives us a 10-handle print.  We're close to a UVXY and VXX cross, too.

I noticed another decent run of George Lindsay's "Three Peaks and a Domed House" pattern in equities, this one on the SPX since September 2013:

SPX 06-05 1Y with 3PDH

If the 1737 level is point "10" on this count, then that's where the pattern will take us.  That agrees with the larger 3PDH count, the mega one since the 2010 lows, where 1737 SPX is point 22.

SPX 06-05 4Y with 3DPH

I added a high level Elliott count back to the larger chart.  The volatility in 2011 is counted as a B-wave triangle, with the impulsive "C" wave starting at SPX 1202.

The count gives us a napkin target of 1957 on the SPX, by about next Tuesday.

VIX 06-05

I would caution against expecting a huge reaction and drop right off the top.  These Three Peaks patterns show tops as an up and down thrust, surrounded by sideways movement.  That sideways movement is what I think we had this week, waiting for the ECB's policy announcement.

So I would expect us to retreat from the ~1957 level, back to 1918 or so, bottom on the June Full Moon, and then hold there, sideways and slightly up, while the market waits patiently for June FOMC.

June FOMC gives us the next leg down to support at 1847-50, which sets up a larger head and shoulders that targets the July lows.  We stair-step down into the Fall with sell-offs of increasing severity, until we are back to 1074 or so SPX.

Good luck to all [bears].


Permabear Doomster said...

It remains an alluring scenario.

Your first level downside targets I can certainly agree with, especially the mid 1700s.

The notion of sp'1000 ever being hit again... so difficult to believe.

After all, where is all the money going to go ?

ECB just cut rates to negative..and you know the Fed will follow...right? Hell, even GDP Q1 supports the deflationary doomer outlook.

So..if low rates, then even more money will switch from bonds to stocks.

Regardless..have a good weekend

T.Berry said...

when nirp comes here it's hard to figure how high market will go. possibly way past bicycles 2200??? that would not be that big of a move. cant imagine how we'd go below 1500-1,600 on the s&p's anytime soon. keeping 15% in cash just in case. market's a joke but will keep rising for some time.

sooner said...

Christian Gustafson said...

Yes, comrade. I'll discuss that in a post tonight, with a slew of photographs taken from a couple of long walks around town.

Bicycle said...

1955.55... was... was that it??!

Could be...

Infact, it would be the perfect place for a top.

In addition to my Nixon Shock target of 2250, I have an alternate count that follows a trend that began the moment World War II ended. It says we should be topping, right about... now.

The 70th anniversary of D-Day was Friday...

The end of the last Winter... begets a new Winter...

Permabear Doomster said...

What happens if we're 2000/2100s later this year?

What then?

I mean..hell, we are almost 400pts above the old double top of 2000/2007, a clear break of multi-decade resistance.

It is precisely why I've dared suggest 'how about we never go below sp'1500 EVER again?'.

Yes there is deflation, but the central banks will hit the PRINT key as and when necessary.

Bicycle said...

What about the Dow? There was no double top there.

The megaphone on the Dow is still in play, is it not? That we would be in a topping process now? And that a minimum -70% bear market is coming?

I need to start scaling in on some DOG tomorrow!

Christian Gustafson said...

McHugh's phi mate turn dates and his long-term analysis of the "Jaws of Death" super-pattern megaphone is originally based on the Dow.

Hmm, maybe instead of SPX 2K, we rally just enough for DJIA 17K tomorrow ... and then that "buy" signal on the VIX kicks in.

You guys noticed that one, right? Friday we closed under the daily Bollinger on the VIX, and then back inside today. This sets up a fairly reliable buy on the VIX, index sell-off.