Jaws of Death count

McHugh has not mentioned it yet in his newsletter, but the S&P is shaping up to draw one of his "Jaws of Death" patterns, Bulkowski's broadening top.  The Q4 2018 market dive is hardly impulsive, so if it's a correction, and everyone is on board for one last moronic credit pump into the markets, some sort of weak trade compromise with China, and the rest, then, sure, why not some new index highs.  Never mind that the real economy is in free-fall, but the Fed will pump QE so we can get subprime automobile loans, and peer-to-peer microcredit, and another $trillion of student loans, and maybe even some sweet MBS, or derivatives thereof.

WW2 re-enactment courtesy of 4chan

If we stay in the current channel, we reach the upper bound of the megaphone at ~2990 SPX in the first week of March.  The Fed is disgusting and dovish, Trump's foolishly tied his fortune to the S&P 500, Xi's desperate now as the rot in their monstrous credit ponzi is plainly obvious.  Melt-up would make sense here, with the usual divergences, low volume, and a cluster of Hindenburg Omens to wrap it all up (again). 

If we fall out of the current channel, we waste some more time, then touch the top of the megaphone ... later ... when pumping new credit and debt is simply no longer possible.

SPX daily megaphone top

This could even overthrow the wedge, especially if we have some crazy destiny to reach the full 2.618 fib extension of the 2008 crash, up at 3048 on the S&P.  This is the last call for debt-ridden corporations to buy back their own stock with debt.  That window is closing soon enough, too.

The $NDX has a similar pattern, with a wedge targeting a great surge to the 8,000 level.  This would suggest one last party for the FAANGs.  

It's all so tiresome.

Just for fun

Five waves up from the 2346 low are actually c of 2.  The tape from 2940 to 2603 on the S&P was the closest thing to a five-wave impulse down that we have seen in all of this.

We would, of course, need "an event" to dive back to the 2007 (year) highs.

The lower line at 1332 is the long-term Fed policy channel, would expect them to shovel a fresh load of fake credit-money into the hoppers on that one (June FOMC), because they have no choice.

c of 2 up channel (5 waves)

Bradley turn

A major Bradley turn, scheduled for today.  If this bounce is out of gas, and we are actually building a five-wave move off the October high, then look for the 5th wave to "extend", since the 3rd wave did not.  Is this some sort of diagonal?  the waves are sloppy triplets, and we have overlap of the 1st and 4th waves.  It's no textbook impulse.

We would hit support from the two earlier lows in the first week of March.  This drop would be particularly dispiriting, for its magnitude, but makes a nice buy into June FOMC.

What would force the hand of the Fed to hike one more time, and force a "Lehman moment" for this cycle?

SPX daily

edit:

What if we are now actually in a wave 2 of a much larger diagonal?

SPX daily diagonal to 1810

A triangle would work well here

We have overshot the .382 retrace of the big drop from 2800 SPX, but this bounce has done the important work of kneecapping the $VIX. 

A bear would want to see it back off and resolve as a triangle into the FOMC at the end of the month.  We can still find our way back to 2520 in a sensible way, preferably with a $VIX of 18 or lower.

The break from the triangle would be violent, potentially even more steep than what we are counting as the third wave.  But it would mark a climax in the selling that would then reverse in a stronger and more sustained retrace.

At some point this year the real damage is done.

SPX daily