Wednesday, May 17, 2017

Little C or Big C?

How much angst will we see from the Trump instability this week (and potential scotching of any idea of tax reform)?  Here are two scenarios.

1. Little C: market sell-off returns to support at 2340 SPX into May opex, where we find support and continue to grind sideways in a long W4 that has another month to go.  It's an ascending/barrier triangle with a technical target of 2480 SPX.  The final (we shall see) W5 up begins with the June FOMC, where the Fed holds the discount rate steady.

2. Big C: a Brexxit-like panic sell-off of 120 handles SPX, all the way to the full .382 retrace at 2280 SPX.  Critical support for the rally -- a trendline from the 1810 low -- lives down here.  This capitulation move would exhaust the selling and end the larger W4.  W5 would begin in earnest on Monday.

Both scenarios wrap up for a candidate top in mid-July, 2480 SPX.

SPX wave 4 scenarios

20 comments:

Christian Gustafson said...

Oh, I forgot to mention, Marine Le Pen did NOT win the election in France, so the modern financial world has not imploded just yet. Just thought you should know.

Bicycle said...

June hike odds plummeting now, barely holding the 60% threshold.

Bryan Franco said...

Is the drama just created to justify no hikes because the Fed is still scared (as they should be)?

Bryan Franco said...

Automation and increasing lifespans are two immeasurably large deflationary forces that the Fed must always fear in the back of their minds.

Hugh Jazole said...

"The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary."

H. L. Mencken

Christian Gustafson said...

Third scenario: 2405 was it, and now we're looking for channel kissbacks and market ruin.

The Fed cutting rates in June is not off the table just yet.

Hugh Jazole said...

Why not the Little C scenario? That looks like a great call here.

Christian Gustafson said...

5-wave impulse from 2405 looks complete -- bounce into opex.

Kevin Wilde said...

5 wave complete yesterday looks like a wave C to me, following an A-B double top. Thus corrective. New highs next week.

Bicycle said...

Comey testifies, absolving Trump and proving Democrats as hair-on-fire clowns yet again, tax cuts back on the table, market skyrockets not just into Memorial Day, but beyond to the June equinox, putting in the final 5th of the supercycle. Fed still raises, and everything seems okay for a week or so, but then it proves too much and the whole world enters the thunderdome

Christian Gustafson said...

Bicycle --

I'll try to sketch out the alternatives and critical areas of support tonight. For now I am glad that the SPY puts I dumped this morning will likely be zeroes tomorrow. That always feels good, like dodging rifle bullets with Churchill.

That surge in VIX was telling us something. The bounce into opex tomorrow may be a W2 retrace, making it very dangerous. We could still head down to test the 2280 level next week, and if we violate it, dang, that's a game-changer.

We have enough waves for 2405 to be a surprise final high. And yet you could read the RSIs to argue that one more remains.

Hugh Jazole said...

People never learn. Can't say I'm surprised though.

http://www.barrons.com/articles/household-debt-climbs-in-q1-finally-surpasses-2008-peak-1495040112

Hugh Jazole said...

Will that household debt force the Feds hand?

Bryan Franco said...

CG. I think RSI and others give a complete top possibility. The only one that doesn't is "no negative VIX div"

Bryan Franco said...

...that I track, at least

Kevin Wilde said...

the clearest EW pattern in XLF and IAI (financials and brokers,) both you have a 5 wave decline from a major rally peak, making it look like the Matterhorn peak. Thus 5 down most likely a Wave 1, and not a C. Since then, we've had a partial rally, and yesterday's sell-off, which looks like complete A and B of a wave 2 A-B-C. If so, we still have a larger partial recovery rally to go in wave C to complete Wave 2. That should be enough to push the SP, Dow, and NAZ to new highs. Then financials and brokers will be in Wave 3 bear crash position. But rally first...

Hugh Jazole said...

You've got a fine candidate for mayor here CG.

http://www.seattletimes.com/seattle-news/politics/seattle-councilmember-kshama-sawants-party-endorses-nikkita-oliver-for-mayor/

Hugh Jazole said...

Latest AII survey, only 24% bullish.

"Optimism about the short-term direction of stock prices fell to a new 2017 low, while neutral sentiment is at a new high for the year. At current levels, bullish sentiment is unusually low and neutral sentiment is unusually high."

Permabear Doomster said...

CG 'We could still head down to test the 2280 level next week, and if we violate it, dang, that's a game-changer.'

2260s would merit alarm bells.

Price structure in other world markets though still argues for broad upside into spring 2018.

As ever... one day at a time.

Bryan Franco said...

Doomie. The foreigns might just outperform.