Wednesday, April 4, 2018

The case for 3070 on the S&P 500


I think we are headed to 3070 on the S&P 500.  I think we are headed there this month.

Getting there will piss just about everybody off.

The bears will be squeezed, again and again as they reload their shorts.  Bulls and bubble types will watch this proceed as a true blow-off top, and miss the OTM index calls which return high multiples.

It will be a most hated end for the most hated rally (since the March 2009 lows).

Tonight the /ES broke out of the old bearish channel.  It looks done now.  The overall decline never became truly dangerous and impulsive, did it?  The 2553 W4 low was made right after the Full Moon this past weekend.

/ES breakout

So here's the case for 3070, a true blow-off move into the end of April.



1. It's a 1.618 fibonacci extension of the drop from 2872 to 2553

2. It is the target for a Big W pattern per Bulkowski.  The psychology of this is simple -- we grind our way back to 2872, squeeze anyone covering at the new high, and push unimaginably further north.

3. The blue dotted line, which is the overhead channel trendline on a LOG chart all the way back to the 2009 lows.  IMO we need to test and reject it one last time.

4. The January highs put in historic extremes on RSI for the SPX, indicative of the 3rd wave of the series.  IMO we just wrapped up W4, so now we get the 5th, with higher index values and lower RSI, the final divergence marking the final high.

I still have the pet theory that the next great window for the start of a real Bear market (via a 40% crash back to the 1810 level on the S&P) will be the first estimate of Q1 2018 GDP, due out at the end of the month.  A miss on this would torpedo any remaining illusions of growth and expansion and animal spirits still in play.  Any bounces will be sold mercilessly.

GLTA

68 comments:

Christian Gustafson said...

Yeah, so that means I'm calling for a 41% market crash into the end of May -- the full moon just after Memorial Day.

If we're at 3070, the VIX will be thoroughly rekt, OTM index puts practically free.

Christian Gustafson said...

David Stockman's not going to like us going to 3070 at all. He does have an excellent piece tonight, like he's the last sane man here in Clown World.

T.Berry said...

we'd need a few more crash calls for that to happen. lol


today is day #4 lol

T.Berry said...
This comment has been removed by the author.
Hugh Jazole said...

It's going to be fast and furious for sure. Take a look at the insane moves on the TRIN.

T.Berry said...

you a buyer today hugh? it's day 4 of the crash .

although this crash isn't as good as some of the previous calls.

Hugh Jazole said...

I took a nibble earlier in the week, but I'm not keen on holding too long here. So far so good.

T.Berry said...

Lol

Hugh Jazole said...

Come on T. Berry, at least give me credit for calling the recent bottom TO THE DAY!! Remember this from the 2nd?

"Calling the bottom today!"

Kevin Wilde said...

T.Berry, please pay attention. The 4 day crash event is on closes BELOW the 200 day. That so far did not happen, thus the count has not yet begun. That does not mean we won't start that count tomorrow. Repeat: it begins the first day of a close below the 200 day moving averages. And most crash attempts fail AFTER day four. Which means the markets goes below the 200 day for four days to scare the bulls and clean out the stops, though the damage is limited while the VIX soars as people rush into protection. Either way, one buys at the close of the fourth day, for a trade, at least. Maybe wait till you make some money before chiming in?

Christian, you mention the recent sell-off did not look impulsive, though wave C of a wave 4 HAS TO LOOK IMPULSIVE. Which means we still have a fifth wave to go on the downside, at a minimum. A four day move below the 200 day to scare the bulls would be perfect, then you can expect your rally, so long as we haven't dropped 30% by then. The problem is, the more rally we see here, the further away we get from the mini-5th wave to end the correction, and more likely wave 3 of wave 3 - AKA the big one.

Martin Armstrong also looking for further corrective into April and May - panic cycle - with a May new low meaning the correction lasts till July.

Remember this correction started with a strong jobs number that put the FED rate hike cycle front and center. Tomorrow is set up to be a very good jobs report, thus good news remains bad news for stocks.

Christian Gustafson said...

Kevin --

I'm not saying it wasn't a little scary at times, it just wasn't doom. It's easy enough to find 5 waves in that (presumed) c of 4.

Bryan Franco said...

It could be a failed c wave flat, and fwiw, Caldaro doesn't even require the c wave to have 5 subwaves.

Bryan Franco said...

C wave of a flat doesn't need 5 internal subwaves per Caldaro

T.Berry said...

outstanding work hugh, great job you nailed it---the bottom is in

T.Berry said...
This comment has been removed by the author.
T.Berry said...

kevin,
guess i misunderstood. thought your crash call called for the 200 to be violated. depth of selling from monday through thursday?



Blogger Kevin Wilde said...
Should today end bad then today will day 1 of a crash a 4 day crash attempt below the 200 day moving averages. Such a scare 'em event should provide a good buy opportunity by Thursday. The depth of the selling by Thursday will deter

Hugh Jazole said...

TRIN confirms short term buy. Longterm still neg.

T.Berry said...

place only my 2nd ever margin buy just now.

will flip when we get near 3070

Hugh Jazole said...

The sheep always sell when they should buy. Will they ever learn?

Christian Gustafson said...

See the IHS neckline @ 2671, Hugh?

Kevin Wilde said...
This comment has been removed by the author.
Kevin Wilde said...

T.Berry, "should today end badly" means did that day end badly? Er, no. This one is a different matter, where the SP is currently under the 200, though everything else remains a small tad above the 200 day. Glad to hear you are adding leverage here. Another percent down and we are officially on day 1 of a 4 day crash ATTEMPT. Markets rally into close then day 1 is POSTPONED. A four day move below the 200 day would provide a killer buy point - assuming we don't crash - though I don't expect T.Berry to accept that nuance and just focus on the crash aspect. He also refuses to accept the crash risk, which is very real. While he is still watching for a bottom, I'm watching for a capitulation phase to mark the bottom. BTW, nothing to do with trade, nor interest rate hikes, and everything to do with the T.Berry's of the world on margin. When they capitulate sell, then buy with both fists...

rotrot said...

https://tinyurl.com/y83uzowg
https://tinyurl.com/yb3ecvj9
some great comments under the March 25 blog post as well as this blog post (April 4)...really worth memorializing...

T.Berry said...

Thanks Kevin. So is the crash going to be 50-90% like last falls?

T.Berry said...

Btw Kevin as I've said many times before not selling for a few more years as the dow approaches 40k

Hugh Jazole said...

You ain't seen nothing yet Mr. Bogle!

https://www.marketwatch.com/story/bogle-says-hes-never-seen-a-market-this-volatile-to-this-extent-in-my-career-2018-04-05


rotrot said...

invest the 4:43 to watch the video...https://tinyurl.com/ybkbfej9

Kevin Wilde said...

T.Berry, all major bear markets are the same in depth, though differ in time. Down 15%, up 10%, down 35%, up 17%, down 20%-25% for a total loss of 50%. These can come in single events like 1987 and 2008, or come in doubles and triples like 1929-33 and 2000-2003.

Kevin Wilde said...

It should be noted the difference between the indexes caught up in a bear, and the average stock caught up in a bubble. Unfortunately, bulls are always bubbles in some form. While the index may only go down 50% - like the Dow 2000-2003 - the bubble stocks - internet, B2B, biotech - got slammed much harder - as they always do - with the premier companies suffering a 90% meltdown, while the non-premier bubble stocks lost everything. Same with the next bubble - housing and mortgage related - where the premier stocks - like PHM and MS went down 90% (sound familiar?) - while the non-premier - like Bear and Lehman - disappeared. So it's not just that stocks take a pummeling during bear markets, it's that anything caught up in the bubble gets near, or totally, creamed. Where are the bubbles this time around? The FANGs, for sure. Boeing and McD, for sure. Oh, and let's not forget the overleveraged companies that go BK during a simple recession that comes when bubbles pop. Think the GM bailout, or the entire banking system here and abroad. Such overextended companies and entities (like CALPERS and every other pension fund) are a recession away from delivering the largest bailout crises the world has ever seen. All it takes is a tiny slither of a pinprick to pop the bubble, then we get a recession, then we get the 90% down move - for premier issues - and total BK for the rest.

Christian Gustafson said...

Market hungry for that IHS neckline at 2672.

T.Berry said...

kevin, only a loss if you sell. most investors cannot time these pullbacks to get out beforehand. rather long term investors should use pullbacks to add and average down. i would certainly be a buyer on a 20+% pullback. because history shows the stock market always comes back 100% of the time. in 5-7 years the stock market will be considerably higher than today. the last thing investors should do is panic----those who sold out in the panic of 2009 missed the biggest bull market in history and it's not close to being over yet.

my margin buy from friday is up over 1% already (that would take 2 years in a money market-lol) plan to be out of it in 2 weeks before cg's 3070 call :)

T.Berry said...

btw, looks like the earnings run up has started. q1 should be another good one but more importantly the outlook should be even better as the tax cuts funnel down to main street.

Bryan Franco said...

T. Berry, I think the market has had ample time to think about the impact of the tax cuts. Nevertheless, I am in the "higher first" camp with CG.

T.Berry said...

no doubt bryan but once earnings start rolling in i believe we'll see quite a few upside surprises and raised outlooks. the econ has been clicking on all cylinders plus we still have the infrastructure bill to look forward to.

as for higher first, i've been in that camp for 6 years and don't see a bear market in sight anytime soon despite the numerous crash calls, final tops, one more highs called during that time. lol. could we get another 5-10% pullback? sure can but longer term (4-5 years out) this market has plenty of upside (we'll see dow jones 40k before it's all said and done). we're in a historic secular bull market creating epic amounts of wealth for the american people. we may never see this type wealth creation in our lifetime again. i've been saying this for the past dow jones 7000 points (or 32 crash calls ago LOL)

we're only in the bottom of the fifth with 2 outs. lol

T.Berry said...

dennis gartman just turned bullish too, you should be feeling pretty good bryan

Christian Gustafson said...

VIX still above 20?!

Got to turn the screws on these mooks. Fed Minutes tomorrow.

Hugh Jazole said...

It will be interesting to see how the VIX behaves around that 2671 area.

T.Berry said...

nothing to worry about hugh, we're going into earnings season, the market is going up for a while

Hugh Jazole said...

Checkout bitcoin. It's happening.

Hugh Jazole said...

Houston, we're ready for take off.

Christian Gustafson said...

We touched the neckline of the IHS this morning.

If it confirms, its target is (2672 - 2553) + 2672 = 2791

That's close enough to 2802 to kick off the next leg up.

Kevin Wilde said...
This comment has been removed by the author.
Kevin Wilde said...
This comment has been removed by the author.
Kevin Wilde said...

Hope you'll used today's rally to put some hedges on. We are at a major technical resistance level, with everyone expecting earnings to be crazy great - buy the rumor sell the fact - and this weekend is set-up for major military action - thus big money traders likely to use today's rally to add hedges in preparation. Trend turns positive, I will buy, till then: watch out below...

...kevin, only a loss if you sell....

T.Berry, that actually is absolutely dead wrong. If what you buy goes down 50% you are down 50%, whether you sell or not, and stocks do not always go back up in a timely manner, and often takes many decades or more. Indeed, I believe the south sea bubble took over a century to get back to even.

Hugh Jazole said...

"everyone expecting earnings to be crazy great" Is there a correlation between stock prices and earnings? Asking for a friend.

Hugh Jazole said...

"Rising aggregate earnings do not guarantee higher stock markets. In 1973 profits rose 25 percent and by another 21 percent in 1974. As profits boomed, stock prices slid nearly in half.

Equity prices can rally when earnings take a hit, too. The very next year, in 1975, stocks rose 37 percent, one of the highest one-year total returns on record, and earnings fell 18 percent. And in four of the five years from 1982 through 1986 corporate profits fell while stock prices rose strongly."

T.Berry said...

" takes many decades or more" LOL

the stock market always comes back kevin---100% of the time---SPOT ON! and it doesn't take decades either---

when in the last 60-70 years has it taken decades?


this ain't the 30's. today's market is a lot different.

T.Berry said...

jpm beats---profits soar 35%,

sets the tone for q1 earnings---solid beats


T.Berry said...

looks more like buy the rumor, buy more after the facts! hedge on!

Hugh Jazole said...

Monday should be interesting with the kerfuffle in Syria.

Hugh Jazole said...

Time to troll Caldero. He said we were past the "crisis stage", and Trump getting elected ended it. LOL!

T.Berry said...

troll caldero LOL. hugh

dow jones (day before election 11/8/2016) = 18,332
dow jones today = 24,570

34% gain (22% annualized). quite a ways from 66%/year but still pretty solid

plus numerous lei that are mostly all higher.

americans wealth is considerably higher since. if you aren't better off then shame shame shame shame

bring on a few more of those kerfluffles LOL

T.Berry said...

since earnings kicked off on 4/9 the dow jones is now up 2.9% (23,932 to 24,635) and we aren't even half way through.

this trend has been in place for 9 years.

T.Berry said...
This comment has been removed by the author.
T.Berry said...

goldman reports blowout (good thing not crazy for the hedgies) sp up 20 in premarket
tis the season up 4% now -one of the easier trades over last 9 years

T.Berry said...

q1 earnings continue to confirm the economic outlook remains very strong. on top of that mortgage apps blew out estimates this morning as a little icing on the cake. the best part is the tax cuts (obviously not been priced in yet) effect in q1 were not as great as they will be in q2. earnings for q2 should only get better.

for those keeping score, since earnings kicked off 4/9, the dow jones is up over 4%, sp up over 4% and nas up over 5%. earnings will continue to be an easy profitable trade for some time.

as for hedging in a secular bull, that money ends up in money heaven about 99% of the time. LOL

my margin buy from 4/6 is up over 5%---granted only my 2nd margin buy but i'm hooked LOL

Hugh Jazole said...

You need to buy MOAR on margin T. Berry! You want to be positioned to take FULL advantage of the summer BULL!!! This thing is going TO DA MOOON!!!

T.Berry said...
This comment has been removed by the author.
T.Berry said...

hugh,
i'm waiting for you to "ding, ding, ding," thee top. LOL

Hugh Jazole said...

Yawn.

Hugh Jazole said...

How bout those earnings!

rotrot said...

https://tinyurl.com/ycvqgdq7

Christian Gustafson said...

How about this math?

If we finished the last impulse subwave of a W4 triangle today, at 2617 SPX, then we are looking for that one last W5 up, right?

If W1 went from the 1810 low up to 2193, it's 383 pts.

W1/W5 similarity, 2617 + 383 = 3000 on the nose.

rotrot said...

lower prices directly ahead!

Hugh Jazole said...

Good earnings = higher stock prices. LOL!

Christian Gustafson said...

For your consideration. Targets ~3030 on the S&P 500.

Hugh Jazole said...

Do we have a window of opportunity here for a wild full moon ride?

Christian Gustafson said...

3070

$IRX telling us the Fed won't hike next week. And Trump is about to end the Korean War.

The month of May then becomes a wild ride to the top.