Volatilites are getting bloodied again, but we won't go anywhere near them until VIX gives us a 10-handle print. We're close to a UVXY and VXX cross, too.
I noticed another decent run of George Lindsay's "
Three Peaks and a Domed House" pattern in equities, this one on the SPX since September 2013:
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| SPX 06-05 1Y with 3PDH |
If the 1737 level is point "10" on this count, then that's where the pattern will take us. That agrees with the larger 3PDH count, the mega one since the 2010 lows, where 1737 SPX is point 22.
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| SPX 06-05 4Y with 3DPH |
I added a high level Elliott count back to the larger chart. The volatility in 2011 is counted as a B-wave triangle, with the impulsive "C" wave starting at SPX 1202.
The count gives us a napkin target of 1957 on the SPX, by about next Tuesday.
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| VIX 06-05 |
I would caution against expecting a huge reaction and drop right off the top. These Three Peaks patterns show tops as an up and down thrust, surrounded by sideways movement. That sideways movement is what I think we had this week, waiting for the ECB's policy announcement.
So I would expect us to retreat from the ~1957 level, back to 1918 or so, bottom on the June Full Moon, and then hold there, sideways and slightly up, while the market waits patiently for June FOMC.
June FOMC gives us the next leg down to support at 1847-50, which sets up a larger head and shoulders that targets the July lows. We stair-step down into the Fall with sell-offs of increasing severity, until we are back to 1074 or so SPX.
Good luck to all [bears].
