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.

Resistance @ 2872 late this week

Futures making new intermediate highs tonight, and we should keep going on whatever short-covering is left and whatever trade deal hype they can gin up for the next few days.

There's a New Moon this week (high), and one of McHugh's splendid phi mate turns coming up ... soon.  Dr. McHugh absolutely nailed several important chart turns in 2018 with his cycle dates.

Current wave-count, looking at a long-in-tooth 5 wave structure here.  Is it the first leg of a much larger wave way up above 3,000 on the S&P?  Is it a "failed 5th" wave that dies at 2872 (last January's VIX-splosion high) and gives us proper impulses down?  We know for sure later this year.

I don't see how we can reach any real agreement with the Chinese on the issues that count, save for complete capitulation on the level of treason by the administration.  They will never respect IP rights, and we cannot accept Huawei (née Nortel) anything on our soil.  A turn late this week would fit either a failed "deal" or a meaningless agreement, where the hype has already been priced-in, and the selling starts.

S&P 500 hourly, wave 3 on peak RSI

Deep-Throat IPO thinks we may see bulk-selling of US equities soon.  He has a larger thesis about deflation in China matched with a bad policy response here, resulting in rampant dollar inflation.  Whichever track we take, what is most important is that we zero out the bad debt, unsustainable obligations, and immoral promises (e.g. .gov pensions), so that we may one day have sound money.

If we can get a proper turn this week, and real impulses south, then this bear would like to see us test the long-term effective Fed policy channel on the S&P 500, around the 1400 level, late this year.

S&P 500 daily, megaphone, supports, down to 1400

IMO, it is this channel on the S&P that will determine the final outcome of this crisis -- whether we break out below the channel into a severe and cleansing deflationary depression, or whether the Fed can force-feed debt and credit into this clown-world system (MMT and teh helicopter moniez)  to send us to hyper-inflationary nirvana.

S&P weekly, with the Fed clown-world channel

Charts 10-28: Speculation on the future

After a week of watching this meteoric squeeze, which puts Bryan's idea of new all-time highs very much back on he table, it's time to throw up a pile of speculative chart rubbish to match.  The gibbons at the Lincoln Park Zoo in Chicago really do try to defecate on visitors, all day long.  Please allow for plenty of room between you and their enclosure.

First, let's take a look at the VIX, whose breakdown through an important support yesterday supports the idea that this will continue in the short-term.  Next support is down in the 12s.

VIX 10-28

VIX dropping back to the 12s would power us to new highs, per the channel we have carved out since the 1820 lows.  2038 SPX marks the top of a megaphone-like trendline coming over from the previous highs.

SPX 10-28

After this presumed top, crash models are very much back in play.  An important deflationista theme is that when things do finally start to move, they will move so fast that everyone who is still playing by the old rules will miss it.  So even bearish shorts will cover too early because some responsible technical indicator told them to do so, and they get to sit and watch the rest of the crash play out.

SPX 10-28 6M crash

Deflation.  What you imagine is money is not, and it is a lot less liquid than you think.

The hour is late.