Thursday, May 14, 2020

Has C down begun?

For the next eleven weeks, equity markets will be in a dialogue with the monetary policy gods who now run our entire world, over the question of direct support, as in Japan.




Market crashes proceed in three waves -- ABC.  The question now is whether "A" and "B" are in, and we are beginning a destructive 5-wave impulse "C" to new lows.

Channel break?  A plausible "B" wave triplet complete?

S&P 500 hourly + channel break OMG

Let us propose this scenario:

  1. "C" down has begun, selling into EOM, support ~2075 from prior lows
  2. Bounce into June FOMC is on "hope" that the Fed will buy equities - 2460?
  3. Fed declines to buy equities
  4. A real market crash to ~1040 S&P after June FOMC, 3 of "C"
  5. Late June to July opex on EOQ2 fund rebalancing and new "hope"
  6. By late July CMBS, CLOs, RRE all imploding, market follows down
  7. Shocking new historic lows - 520 on the S&P 500?
  8. Fed announces direct purchases of $SPY, $QQQ at the EOM July meeting
  9. BEAR MARKET OVER
  10. MMT and start of the final collapse of global credit monetary system


S&P 500 hourly "C" wave to 520

Good luck to all friendlies.

33 comments:

christiangustafson said...

S&P sure is closing gaps on its chart nicely. This new direction -- and these red candles -- may be genuine.

Randall Beehomes said...

When China agreement officially scuttled we should evaporate

instigator said...

mmmmmmmm you're dark
Glass half empty type of guy
However, I like your style and thank you for your time and effort

christiangustafson said...

First leg, we rolled over right about at 50% of time. Let's see if she's done or wants to putz around a little longer.

christiangustafson said...

Pretty correction today.

Kevin said...

One more series of highs to go, then watch out below!

Bryan Franco said...

Kevin. Monday pop followed by epic fade?

Kevin said...

Bryan, a four day surging rally would do it, especially if above SP 3000. That would really get folks juiced up on the bullish side. A larger C wave rally to test the 200 day for the Dow Industrials near 26.4K is also possible, although tis over when the next rally fails. Just a question of how far the bears get squeezed before the big turn comes.

umdengineer said...

CG,

I think the Fed reads your blog just to f*** around with the EWs you draw.

I thought we might have an inverse head and shoulder here but it looks like the Fed doesn't want to wait. Do they plan for the market to recover in time for the election?

christiangustafson said...

Big test likely the real 200 DMA late this week, huh? All the Bears always have started with this retest and fail.

Kevin said...

Yes, but which 200 day MA? The SP one near 3000 (close?) or the Dow Industrial one near 26,400 (+9%?) For traders like me, that's a BIG difference.

Kevin said...

A few weeks ago I cautioned against being too bearish, as oil was hitting $5 (in real pricing for continuous contract,) and had the look of an EW 5 swoon, which are impulse ending moves. That suggested a bounce to $35 level for oil, and here we are.

I also was wary of bearish position, as small caps - which have a large energy and financial component, with financials having a huge interest in the oil sector - had yet to flush out the bears.

I suggested it maybe the 200 day moving average of the Industrials, transports, and small caps would cap this rally, and not the S&P500, which everyone was focused on. And here we are with the SP still struggling at its 200 day, while the more important others have flushed out the bears and have moved much closer to their own 200 day.

Now all that has happened, the bulls are in a much weaker position, and the bear turn can land at any moment. The indexes may inch higher to end Month and begin June, although a gap down tomorrow wouldn't be a surprise either, and I've already reversed my TNA positioning in favor of TZA and TVIX. I still hold longs overall - QQQ - but will reverse those for PSQ and QID once trends south.

We will have to see how any correction unfolds as to whether Christian's charts will fulfill their destiny, or if the March panic lows was actually a true bottom and BTFD remains the winning approach.

Here? I see more risks on the long side than I do opportunity, so hedges on!

Bryan Franco said...

VXX bid today, so far. Smalls' outright negative today, so far. No new short term low in VXX relative to a new short term high in SPY. Interesting rotation out of software yesterday that completely reversed today. Software getting massively weighted in the growth indexes. Maybe Salesforce earnings after the close today marks an important turning point for the industry, and consequently, for the markets.

christiangustafson said...

This looks constructive.

christiangustafson said...

E-D finish?

Bryan Franco said...

Have not seen spreads blow out like this in the small names in months. Not sure if it is a one day fluke yet or what, but caution seems warranted.

Kevin said...

The perfect set-up would be to see the SP cash drop to test 2980, followed by a rebound to 3030 to complete the right shoulder of a head and shoulders top just above the 200 day MA. Then we gap down below 2960 as things go ape in Hong Kong and China retaliation against whatever Trump does today. That would complete a perfect Island reversal under the 200 day, and set us up for a third wave mini crash.

Even the bull case looks scary to me. Look at 2015 when the NAZ suffered a major sell-off only to rally back close to its old highs. Then it smashed to below the 200 day - which is currently 10% lower than current - only to see a rally straight back to near its old high - anyone up for a 10% down, 10% rally (I am...) - which was then followed by a major 5 wave sell-off that smashed below the initial crash.

So, NAZ 9359 to 8415 to 9330 to 6000. All over the next month or two.

christiangustafson said...

I'll take September for the formal announcement that the NY Fed has a new facility dedicated to purchasing the $SPY.

cbasten said...

Is buying a put on AMZN suicide?

Kevin said...

AMZN may have a wave 5 rally still to go.

Better might be the semis, which are in the EW 2 position, and thus ripe for a major selloff. Semis are also in the crosshairs of any China spat, as well as cyclical in nature, thus hurt by a prolonged recession, which is likely. SMH also have a good entry point near 139, and a clear stop point if the rally resumes at the 143 breakout point.

Indeed, that SMH 143 is good stop for all bear positions, as we really shouldn't see 143 hit if the bears are right.

christiangustafson said...

So POTUS calls a big Friday presser to show us what an incredible coward he is?

Maybe he can call in the Army Corps of Engineers to help build a sturdy bridge to Formosa from the mainland.

cbasten said...

Let's continue to let them steal our trade secrets, and buy us out of our JV's for $0.20/ on the dollar for all of eternity.

Bryan Franco said...

I listened to the press conference. Nothing new, so clearly just given to squeeze more shorts. That was all it was. They are trying to make someone whole.

cbasten said...

I don’t think shorts are going to be squeezed next week

umdengineer said...

Another black swan with the rioting. Can the Fed payoff the rioters?

christiangustafson said...

The market is excited to see us return to growth and recovery. The 200 is now support, that's just grand. Is the next plausible resistance the top of the megaphone? (SPX around 3115)

Trent said...

@Christian

Have you ever read this guy? Entertaining posts and a totally different angle them most.

http://www.deepthroatipo.com/alibabas-fiscal-year-end-earnings-call-5-22-20/

Randall Beehomes said...

Great write up.

christiangustafson said...

Yeah, he's amazing, if sporadic. Thanks for the tip on his latest post. They take a LONG time to digest.

Trent said...

I think his argument is the same as most, the system is doomed, but his angle! That the Chinese are going to purposefully pull the rug out from under us, is very interesting. Dethroning us without a war, essentially the people conning us get conned. Makes me think of Order 66

Trent said...

This was also excellent like all his work:

https://consentfactory.org/2020/06/01/the-minneapolis-putsch/

christiangustafson said...

Nope, looks like the channel held and we survived for now. We're probably good for 3270 into next weekend and the Independence Day holiday.

Do keep an eye on the 3GD in China -- it is a potential catastrophe that the Fed cannot contain. It could easily outdo the Taiping Rebellion and even rival WW2 in scale as an epic human disaster.

Hmm, interesting. I knew this fellow in college, many years ago. Very cool to see what he has become in the China.

christiangustafson said...

Just in case you guys think I'm losing my mind here.

This is serious business. And, yes, I have a model for the S&P 500 for the case of a 3GD failure.