Thursday, October 2, 2014

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.


Bicycle said...

This current decline had better reverse soon, or we are going to slice through the bottom of the rising wedge forming since the beginning of 2014.

A big bounce here... and soon... or the end isn't near--it's here.

Permabear Doomster said...

Well... CG... getting interesting isn't it?

1900.. then a 'dumb bounce' for 2-3 weeks... and then I'm calling it.

For the big money...short stops 1990/2000.

Christian Gustafson said...

200 DMA fits in well next week as support.

Maybe -- dumb bounce for only a week. Up to now vol and vol ETFs have been subdued. Watch out, though, if we should reject off an old channel!

Bicycle said...

That very well could have been our bounce off the bottom of the 2014 YTD rising wedge. 4 is done and now we will either set a new ATH on the Dow somewhere around 17375, or we will have a failed 5th. I like the latter to happen just after taking one more crack at Dow 17k.

Just think, a couple years from now, the SPX will be in the 200s, a decline only stopped by the fact that no one is able to trade any longer, as the whole banking system and all necessary infrastructure will have collapsed. The population of California will have died or migrated of thirst, half of the rest of the country will be dead from the Ebola, and the rest will be irradiated by Russian nuclear weapons.

Bryan Franco said...

The next ATH should be it. I would so much rather them get it over with now, otherwise we have downside capped to 20%, and that would actually make it more likely that we are in a large Wave 4 down (in a new Bull market) as opposed to having completed the ultimate top (C of B in a guns-and-butter market).

Christian Gustafson said...

So here we are at another crux. Next week's turn dates could provide a (the?) top.

Couple of things in Bryan's favor:

1. UVXY was so subdued on this run

2. "wave 3" did not get scary and extend

Christian Gustafson said...

BTW, there is a sick, sick wave count that can put another (one ... more ...) all-time high ahead.

I'll post it tonight. It is evil.

Bryan Franco said...

Would love to see 'em CG !

Bicycle said...

We're right on schedule.

Dow Jones Industrial Average, Bearish Rising Wedges.

What lies ahead is that the current final 5th can give us a new ATH on the Dow at around 17375, which will complete the kiss back to the larger bearish rising wedge from 2009, and trigger the big Dow bear megaphone to resolve.

I would pick October 8 for this key top, given that it is the date of a Total Lunar Eclipse and Full Moon. By October 8 we should also find that the incubation period for hundreds exposed to the Liberian Ebola on US airlines and throughout Dallas is over, and the 2014-15 United States Ebola Pandemic will begin.

Christian Gustafson said...

A chart for Mr. Bicycle.