It's not 1987 ... yet

We still have gas in the tank.  Quite fine with me.

It's going to take 2 things to kill this market dead:

1. Q1 earnings season badness.

2. The first estimate of  Q1 GDP due EOM April.  If this misses, markets crash and stay crashed, until the FOMC can regroup with a new QE in early November.  A weak GDP read upsets the entire recovery/growth/animal spirits narrative, and the Fed is not yet ready to do anything about it. 

But first we need to touch the dotted blue line one more time.  It has stopped every attempt in this eternal credit-expansion rally.  It's not all that far away, and we are setup well to visit it.

The slope of the recent declines since January point to ominous targets.  Let this run for a month, and we're back at the 1810 lows.  Let it run into the Fall, and we're at scary new market lows under March 2009.

The leverage is there, the crap debts are there, the big players (pension funds, 401ks, ETFs) are all ready to sell and keep selling, at this rate of decline, at the slope shown here.  

And crashes are three-wave ABC affairs. 

SPX touches the dotted blue line and dies

Do we need to touch this blue line on the S&P?

The dotted one, in the long-term chart.  Is that where we need to go?

SPX endless credit expansion

It would be about 3065 into April opex, crossing a more recent channel.  After tomorrow's hike, a dovish "3 hikes this year" consensus would get us moving higher to test this trendline.

SPX daily, rising channel into April

What fun out in the St. Patrick's Day parade here in Seattle.  One of these kids is mine.

No! the bear case is hardly finished

Do not forget that the job of a wave 2 is to fool you into believing that the previous direction of the market is still viable.

But we still have a perfectly good 5-wave impulse off the 2872 high on the S&P 500, and, IMO, a decent wave 2 count as well.  Spike A from the low, a brief .236 retrace in B, and the long C of 2 in 5 waves whose aim is to fool us into expecting new highs.

S&P 15 min wave 2 count

The market has ignored the Anbang and HNA stories for the moment ... basically that the entire narrative of China saving the world with its growth is exposed as a complete fraud.  It turns out instead that China is just an extreme example of uncontrolled credit expansion and capital consumption, which is now on the verge of imploding into a deflationary black hole.

So the bear case eagerly awaits fresh news from the Far East on Sunday night.  If this was indeed a "wave 2" retrace, then it has now achieved its goal of flushing out the shorts, and the markets can collapse again with astonishing speed.  It is a long wave 2 precisely because it is important, we are determining right now whether the great Bear market is finally here.

SPX at Brexit lows into March FOMC

Bond-pocalypse for the win

W1 down was 340 pts on the S&P.  A wave 3 impulse here should extend to 1.618 of W1, i.e. 550 handles.  Our first 50 are already in the bag, and if the 10Y Treasury collapses overnight to 3% yield or more, then the remaining 500 should be easy -- only 100/day through the end of February. 

We already visited the 200 DMA, so now we can crush it.

We are so due for this sort of move -- a quick 20% crash in equities.