Three Peaks and a Domed House may complete by Christmas

This week is all about banging out the margin calls and completing our descent to support (?) at 1820 SPX.

September FOMC will hike rates and initiate the next plunge to the 1530 area, by the October 9 Bradley turn date.

A final crash from the next Bradley turn in mid-November brings us down to 1074 SPX, just in time for the Fed to announce its next package of Quantitative Easing.  We will then be running on faith and fumes the rest of the way.

The descending trendline here is so steep, that this cycle may finish entirely by Christmas.

SPX 5Y 08-24 3PDH

VIX only 28 on a 100-handle S&P gap down?  Is that weirdly bullish?  Margin calls coming.  Edit:  VIX quotes bad on my end this morning.  UVXY!  OMG.

Charts 05-27 am: One more high! and 3PDH update

We've still got the daily and weekly SPX Bollingers to visit, and we could come within a few points of the monthly Bollinger Band as well.

I noticed that the May 6th low actually was right at the .382 retrace of what we have been counting as "wave 3" in the ending-diagonal that is now terminating the reflation rally effort since the 2009 lows.  So let's call May 6th, "wave 4" and be done with it.  That would put us in the final wave 5 now, with (a) of 5 complete and (b) either complete now, or finishing up soon.  (c) of 5 will be an impulse wave to a top, ideally a touch of the top trendline that defines the wedge.

I'd like to see a steep, peaked, castellated structure up here for our domed-top, something volatile like this with deep retraces that shakes out all of the sissies.  It's a series of drops with retraces to visit and reject old channels. 

SPX 05-26 Domed-top structure

The pattern defines a head and shoulders top with an initial target below 1500 SPX.

SPX 05-26 3PDH resolution

This reaches a climax this fall, whereupon the Fed is very likely to do something bold again at the December FOMC meeting.  The short-squeeze will be epic.

Ben Jones's invaluable Housing Bubble Blog reports that idiots are waiving inspections again to get in before they are priced out forever again.

CNBC on Colorado. “When Christopher Simmons began shopping for a home in Denver six months ago, he had no idea the risk and the frustration it would take to get one. The 27-year-old had good credit and cash to put down, but that was not enough in this red-hot market. Finally, Simmons went under contract on a small home in a transitional neighborhood, but only after beating out five other bidders. He wrote a letter to the owners, describing how he had grown up in the neighborhood, and then he added a risky tactic.”

“‘I waived the inspection and the appraisal contingencies on all of the offers I made and on this one as well,’ said Simmons.”

“‘Prices are going crazy. Multiple offers, love letters, videos, all kinds of things to appeal to a seller in order to make yours stand above all the others,’ said Denver real estate agent Jill Schafer.”

For all the greater-fools out there laundering Chinese graft-fiats or desperately buying real estate sight-unseen, let me introduce you to Michelle:

Charts 05-12: Range-bound through May?

We did not get a spike up to the upper daily Bollinger Band on the SPX on Monday, dropping us back in the old range.  It's starting to look like a smaller ending-diagonal 5th wave within the larger pattern since the October lows.  It could easily last to the end of the month and eat the theta of anyone betting hard on a seasonal May sell-off.

Here's a proposed count:

SPX 05-11

The first target of a break would be its point of origin, the 2040 area SPX.  The 200 DMA will be in this range into June FOMC, setting up a bounce back to test the wedge.  A failure turns our attention back to support at 1820 (for the next bounce).

If the Bollinger Band theory holds out -- that we need to reach it on the daily and possibly the weekly SPX band, like we did in the 2000 and 2007 (year) tops -- then we have a very useful signal and guard against shorting this too early, while it is still stuck in this dangerous chop.

And the larger meltdown into the fall, of course, as we roll-over the old supports are all lost (desperate, doomed rallies).

SPX 3PDH

Charts 05-05: Greece is saved?

The meeting of the Eurogroup finance ministers looms next week, where they will evaluate Greece's progress towards restoring the proper growth and the animal spirits, and decide whether to make their next installment of bailout money.  The IMF is first in line to be paid.

Ah the good times

Greece needs the cash.  They have no real economy, they are broke, everyone knows it, it's a matter for extra-innings game-theory at this point.  And I think the shabby treatment of Tsipras last week was the tell on this.  Now that they've sidelined this crazy bomb-thrower, this socialist madman, surely the responsible adults in the room can work something out.

The market can trend mildly down the rest of this week, back to 2080s on the SPX, to set up the final impulsive rally, c of 5 on our ending-diagonal count, that will finally break through the resistance in the 2120 area and reach the upper boundary of the wedge.  Greek salvation gives us the last burst of energy we need to put in a proper top.  This would complete into the next Bradley turn date window on Memorial Day in these (still) United States.

The 4/27 Bradley turn did mark a significant high, which was good for a week.   After Memorial Day, we'll find out if the Greeks have any of bailout money left over from the ECB to make their govvy salaries and pension payouts at the end of the month.  That may be it for them.

Short-term count, we're in "b" of the last 5th up here.

SPX 05-04

Larger count, with a low into FOMC.  A strict technical take on this is that returning to 1820 SPX into FOMC, the Fed could even raise rates, and it would rally the market.  I'm serious.  They could come out with a triumphant statement about how everything is just great now and it's well past time to normalize rates with a 50bps hike.

The confused market would marvel at the sheer huevos of these guys and proceed to squeeze any shorts still holding into absolute despair.  Bullard's meddling last fall (when the 10Y Treasury yield crashed) and the June FOMC would then make nice book-ends for our 3PDH domed-top.

SPX 05-04 1Y

If the VIX keeps bleeding -- low 11's into the Memorial Day break.  Everyone patiently waiting for a fall 2015 crash might not like it if it happens in June and July.  The crash would come on a kissback and failure to re-enter the old rally channel, as charted above.

VIX 05-04

I've been reading Georges Sorel lately, interesting fellow, and he says that it's the optimists and idealists who spill all the blood and fuel the Terror when things don't go as planned.  We pessimists set humble goals based on our knowledge of human nature, and have no interest in utopias.  It's the true believers out there that are genuinely dangerous; they go off the deep-end in a hurry when the real world does not conform to their wishes and start lopping heads.  Krugman to the barricades!

The task of April is to return us to 1820 SPX

When the market finally rolls over, it will plummet like it did in August of 2011. 

Then it will bounce, and roll over again, but harder -- a May crash.  But the worst of it comes on the third leg down, a sustained bloodletting that simply refuses to end, as the pension funds unload.  A return to the 1000 level on the S&P 500 by the end of June is very possible.  It looks ridiculous on any long-term chart, a sheer cliff.

But who is seriously going to buy the dip and re-establish any degree of confidence?  All we need to do is get the selling underway, kissback two critical rally trendlines, and the market will implode. 

When you remove the QE supports, the market returns to its point of origin.  Only now we are laboring under all that debt.  The weakness is there, so are the warnings.

At least this first leg down will be highly tradable.  This may not be so when the real endgame arrives.  So stay frosty, Be like Bibi:

a young Benjamin Netanyahu prepares to trade SPY options

April's task for the S&P 500: steep decline, bounce at support

The Panic of 2015

April - June, gentlemen. 

Or maybe I'm just trying to stay ahead of Bicycle in the bearish arms race.  He is formidable!

SPX 1Y "Panic of 2015" crash

June rate hike, please

Please, pretty please.  Janet, I'll send you a Starbucks gift card, good for a latte or baked goods, or -- what the heck -- why not both!  Treat yourself right.

SPX 1Y head & shoulders top 3PDH etc etc ceteris paribus ad infinitum

Charts 02-18: Get dressed for the big dance

The waves are lining up for a top in the mid-2120s next week just before the final Greek double-secret probation deadline arrives.  With a plausibly-complete wave count and the upper Bollinger Band on the daily SPX within reach, it may be time to get our war face on like old von Mackensen here.

Anton Ludwig August von Mackensen

The short-term SPX count seems clear enough.  Waves 1 and 3 each took 4-5 days.

SPX 02-18

This gives us a sharp drop back to support at 1972 SPX, followed by a kissback rejection of the old 2-4 trendline and a harder fall to 1820.  

SPX 02-18 6M

Today's notes suggest that the Fed will NOT raise rates at the April meeting, bouncing us back up toward SPX 2000.  We must keep a very close watch on the yield of the 13-week Treasury bill during this period for clues that the Fed will raise at the June meeting.  There's another channel kissback/rejection opportunity around 1985 SPX.

That would drop us to the next level of support around 1530 SPX.  A crash in September would finish the 3PDH retrace back below 1100 SPX.

SPX 02-18 10Y

VIX is setting up well for a low against its lower Bollinger Band and a support trendline that has been running for a while.

VIX 02-18

Watch the upper Bollinger on the S&P 500

I've been watching it for weeks, and now we are in hot pursuit of the top Bollinger Band on the daily S&P 500.  It's up at 2089 today, rising at 5-6 points/day.

Let's catch it next week, and hit that pink top trendline.  Maybe that will be our point #23 on the 3PDH supermodel, at long last.

SPX ending-diagonal count

Gold to $600?

Sure, why not.  Simple count, not an impulsive structure.  ABC's so far on this one.

/GC weekly

 A few minor tunings and adjustments to the 3PDH that rules my world, too.

SPX 3PDH

Charts 02-09: Stretching things out

I don't feel any sense of urgency at this juncture, certainly not to put on any shorts just yet.  Wednesday has a Bradley turn date on the classic model that may time well with a bottom; I'll consider taking a small long with February calls on it.  A little dash of Euro-hope and some fresh USD-JPY carnage can still power us to new highs.

SPX 02-09 60D

I still think that any Elliott count considering 2093 as the final high and the start of a "wave 1" impulse down is foolish and defective.  The awful blogger Daneric continues to push this count, because his analysis is lazy and sloppy and ultimately deceptive and fatal to his readers.  He may actually be some sort of market shill selling puts to the permabears, I dunno.  How are those SPY 195 puts working out for you guys, huh?  Wave 3 down any day now ...

Stretching the larger 3PDH model out a bit across 2015, with a final low at our point #10 target at 1074 SPX in November, which works on so many levels.  The specific turns in this chart are mostly Bradley turn dates based on the classic model.  The largest leg, the crash leg back to 1074 SPX, lands squarely in the Fall crash season. 

SPX 02-09 3PDH model

This entire move back to 1074 SPX counts as "A", with a big bounce "B" into early 2016 and a final destructive "C" to wrap it all up.  We have established important levels of support at 1972, 1820, and 1560 SPX.  This model has us reaching each level and bouncing just enough to kissback the previous channel or support trendline.  Once we get a final high with that Bollinger Band touch and all of the other good stuff, I plan to trade this model both short and long.

Looking for a final high around February opex.  Gotta eat the last of the puts and run the VIX down a bit more.

One more thing.  Speculating about when the Fed will start hiking rates (June FOMC?), has us inevitably looking at the 13-week T-bill for any clues.  The Fed follows the market, right?

If we look at a very long-term Yahoo! chart of ^IRX, we see that it has been flatlined throughout the whole ZIRP experiment, but that RSI has been very slowly building over time.  So what will happen if the RSI for ^IRX breaks out over .5?  Will this see a breakout spike in short-term rates, and a commensurate move by our Fed masters?  I think so.

13-week Treasury Bill

The question is what happens after SPX 1560

You see, a bounce at that support level sets us up for a particularly nasty head-and-shoulders, one for all-time, a true classic, epic fail.

SPX 02-02

The upper Bollinger Band on the SPX has come in about 50 handles(!) over the past couple of weeks, which for me is the one last requirement I had before expecting any kind of significant top out of this.

Our next visit to the 2064 SPX level will be met with particularly fierce resistance.

Checking the candles, we could even gap down over night off this level.  It would form an "island top" pattern with a similar gap UP we experienced back in November.

Charts 01-29: Updated 3PDH

My chum Matt_bear has sifted through the tea leaves and thinks that the Fed will raise at the June FOMC meeting instead of April.  "Mid-2015", right?

Matt has a remarkable Rain-man sixth sense about these things, so I never take any of his suggestions lightly. 

In the 3PDH model, the last downleg from point #27 to #28 is moment of panic, horror, and capitulation.  Here's my take on the model if we get our last leg up to 2080 over the next 2 weeks, and if the Fed bumps short-term rates at the June FOMC.

So did 2093 SPX mark point #23?

SPX 3PDH

Charts 01-28: Domed-top proposed

All sorts of ways to count this -- still could get that old triangle.  I still think the Yen has one more capitulation low to make above USDJPY 120.

Here's another variant, where we land on the 200 DMA on Friday.  The overall shape is a much sought-after domed-top, a head-and-shoulders top with a neckline at 1972.

SPX 01-28

The 5th wave would fail to make a new high on the SPX.

Pay attention to the tape

from the Thirty Years War

Pay attention to the tape -- we're at a very important juncture here.  Not only did we turn down hard on an intraday rejection of the top of the megaphone since July, but the everything since the top has been very deliberate -- and free of gaps.  Did you notice today that the drop to 1982 was a perfect fib 1.62 times the first leg off the top?

We're setting up for much larger moves in 2015.  First, looking for us to wrap up the wave count with a 1954-ish low into FOMC this week, and a bounce into Christmas.

SPX 12-15

The larger count to return us to the 1080 SPX area over Spring, with 3PDH labeling:

SPX 12-15 3PDH

And a quick look at UVXY, which was instrumental in identifying the significance of our rejecting the old megaphone upper trendline.

UVXY 12-15

GLTA ...

Charts 10-15: To the bear trendline

Updated count.

If it's on, we are finished trading above 1900 SPX in this monetary regime.

SPX 10-15 a.m.

Added: the "eat everyone's theta" count:

wave 4 eater of option theta

How the market can reach 1233 SPX by the end of January

The bear trendline for this drop is already in place.  Surely it is the end of days!

I don't know if we'll put in a new low under 1925 SPX this morning, but I'd like to see us close the week at 1948.  This will clear the table of the 195 SPY puts I should have held on to ... grrr ... oh well, plenty of good trades ahead.

A lower trendline from the waves already in place takes us to 1233 SPX by the end of January.  The Fed will accomodate, you better betcha, and we will bounce 300 handles back up (.382 retrace) into the Spring.

But first for the crash call.  Big picture with the bear trendline and surprise support from a triangle from 2011.

SPX 10-09 4Y

It starts this fall with a series of breathtaking drops to key support levels: 1814, 1737, 1560.  The crash leg in January kicks off right after Christmas on the 12/26 Bradley turn, as everyone tries to secure year-end profits.  This quickly gets out of hand!  ONOZ OMG ...

Bounces are typically .382 of a previous larger leg, and they also correspond to corrections we experienced on the way up this thing.  Yes, these are all 3PDH numbers as well, you know the drill.

SPX 10-09 6M

Short-term -- I'd like to see that close at SPX 1948 today.  We can make it as high as 1962 into Monday if there is a B-wave triangle playing out here.

The question re the drop from 2019 to 1926, whether it counts as a 5-wave impulse or not, is moot.  Call it "A" and be done with it.

SPX 10-09

First important support is at 1814 SPX just after October opex.

Charts 10-02: We're in a non-extended wave 3

Needed to get a revised chart in.  Tonight I'll update the dual-nested Three Peaks and a Domed House patterns.  Yes, two 3PDH.  One inside the other.

I was excited Monday over the 20 handle gap down on /ES and then support, but what I think we actually had here was an end to an oddly-shaped minor wave 1 (see chart).

The larger count has us in wave 3, but this is a subtle one -- it's not extending.  At SPX 1930 (today) it should be slightly longer than wave 1, but not at a multiple of 1.618x of it.

So we either have a stealth wave 1 (bear case), or this is yet-another ABC off the top that is just a correction.  If we close with a stronger-than-expected push into Friday (SPX 1957?) that will leave us sitting right on another inflection point.  Which way to go?

The bear case would take us still lower next week to meet the 200 DMA at 1904 support and the Full Moon.  The following week we would have one more kissback off the old rally channel at SPX 1966, and a dive to the low-1800s into EOM October.

SPX 10-02 a.m.

The bearish count from here

Last week my sister was in town from upstate New York, so I took her up Sahale Arm above Cascade Pass.  We had a nice day out in the Cascades.  You can see that the blueberries are just starting to get their fall color.

looking south over Sahale Arm, North Cascades NP

First order of business this week is to get back to 1978 SPX for a bounce; then we can reject off the old channel in a few days.  This will give us a stealth wave 1 off Friday's high.

SPX 09-22

SPX 09-22 3PDH

SPY option bets and the case for SPX 2050

There is an interesting stand-off in the October SPY options.  On one side, we can see some very large and very bearish bets (put options).

SPY October 2014 options

On the other, we see a surprisingly large number of SPY 205 calls.  So who is right?

The October 8th turn window -- Bradley turn, full moon -- looms large for some kind of turn.  Up until now I've been thinking of it mainly as a low, like it was in 2008.

What makes it interesting as a top is that 10/8 lands precisely on this 2050 SPX level.  There are E-W wave considerations as well, for the larger move up from SPX 1737.

It also works with the dual-nested 3PDH patterns, which eventually wants to bring us back to SPX 1074.  See the thick orange line on the chart:

SPX 2050 October 8th turn and 3PDH

There are big options bets in place for October.  One of the two camps is probably right.