Not ... yet ...

This perma-bear may be the only one who believes right now that we still have that one more high left in the tank, and soon.  We are close to the top and the start of the meltdown, but there is a very simple reason why I think we have one last rally and high ahead.

Trump must resolve the stand-off with China.  He simply cannot proceed into the turning of the business cycle into recession with the China tariffs in place.  Any third-rate reporter from the USA Today could mail this one in, about how Trump brought back Smoot-Hawley and destroyed the great Obama economy.  A China deal must happen, any deal, any face-saving compromise, or Trump will be on the hook for what is coming and not see a second term.

And China needs this, too.  They desperately need our food.  The pork crisis in China is dire and threatens food prices and social stability.  At this point, Xi, too, would like nothing more than to settle this for now and take it up later, return to playing the "long game" for a while longer.

The tariffs kick in again on October 15, but I don't think Trump will wait that long.  We through a pin through critical support today and managed to close back inside -- a stern warning that the next break will keep going.

SPX daily

Trump is out of time and must make a deal now with China.  Even subjects like Huawei can be tabled for the moment, because no one is really looking forward to the cap-ex spending on a nationwide 5g wireless network anyway.  What if they eased the limits on Huawei but no one bought their wares?  We do not need 5g, and can't afford to implement it at the moment.

A trade deal, leaked soon and signed over the weekend, completes the rally at 3094 SPX by next week.  There is resistance at 3050, which we will probably take out, an "overthrow" of a trendline.

After October 10, the Fed closes out its latest repo program and we will see if anyone still needs fast cash.  Coincidentally, October 11th marked the high for the year 2007.  There is some symmetry here; let's start by looking at the beautiful 2008 crash tape.

SPX crash 2007-2009

We take the tape and copy it, as a graphical representation, and drag it into the present-day, fit it to the curve and constraints of the giant megaphone top we have drawn since January, 2018.  See the retests and well-proportioned bounces?

SPX daily with 2008 tape overlay

The narrative is plain enough.  We test the lower supports, bounce into January again, with all eyes on the Fed, and when it declines to provide a full QE program at its January meeting, we lose that support and experience something far worse than the last cycle.  Perhaps by the time the Fed is ready to intervene, events and leverage are in motion and a grim trend cannot be stopped.

2020 off a cliff - who knows?

But won't it take more time?  Why should it?  That is the meaning of a true crisis, the point of recognition and scramble for the exits.  Forced selling.  Margin calls.  Who still believes that we can get growth out of debt?  Oh, are there value investors out there prowling for diamonds in the rough?  How about stock buybacks with corporate debt?  Will the VIX break 100?

Trump can blame the Fed, or the Democrats, or Brexit, but he absolutely cannot have the tariff issue around by then if he wants to be re-elected.  He could even be impeached and convicted (of whatever, because reasons) in the Senate.  And I do think he can see a second term, even with this disaster, if he is able to expose and implode the Democrat party apparatus with their scandals and high treason against the nation.

But let's see if we can complete this topping pattern first, on positive trade news.

Are we there yet? Are we there yet?

Friendly reminder: Deutsche Bank is on fire, and the Fed is still tightening its quantitative.

Something has got to give -- faster than expected, and more severe.

SPX daily

Let's wrap up these megaphones into July 4th

Mnuchin has suggested that the USA and China are close to some sort of trade agreement, and maybe we are.  If they manage to save face here with something, it still won't save the next dozen Baoshang Banks that some down the pike.  The Chinese banking system is beyond insolvent.  But it will rally the markets to new highs.

We have this smaller, local megaphone.  It's in five waves, although the third is the shortest -- hardly an "impulse" wave.  It's one of those very bearish expanding ascending wedges my old friend Lunatic_fringe used to hunt.  Timing is good into the July 4th holiday.

S&P 500 hourly

And here's the big megaphone.  The S&P 500 really wants to tag that area right over 3020.

S&P 500 daily

And then it's just a matter of how quickly this implodes.

S&P 500 doom series

Two megaphones

There are two megaphones in play.

There's this one:

S&P daily

But also this one:

S&P 5 min

What piece of good news could drive the market to such heights (3018) by Thursday afternoon?

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

How about 2953 on the S&P this Tuesday?

Looks about right.  Extended 5th in this ending-diagonal as well.

In the big-picture count, the W5 is also the extended wave.  We just need to finish up just over the 2950 level, and get some sort of vicious key-reversal day.  $NYA daily still showing its divergence -- no new high.  Looking forward to seeing where we are this Tuesday.

S&P 500 ending-diagonal

2000 top redux

Go back and look at the top from 2000, daily candles on the S&P 500, with the spike high and the 5-wave move that failed to best it.  That's what we have seen now since the end of January. 

With a similar slope to the sell-off in early February, we're looking at a first low at 2445 SPX, two weeks from now.  There is channel support from the ancient trendline on the S&P through the lows at 1074 and 1810! 

From there we'll visit the 200 DMA as overhead resistance instead of support, and August should shape up to be something truly special.

I can't wait to see the QQQ back at $20 next year.  Oh, you thought these companies were worth something?

SPX completed 5 wave channel -- failed 5th

Ending-diagonal 5th wave finishes up EOM July

It looks like we can close the gap on the S&P 500 right into the first US GDP release at EOM July.

If w4 of the ending-diagonal ended at ~2692 on the S&P, the minor w5 will equal the w1 and fill the chart gap up around 2856.  Then we can begin our trip back to real support at the 1810 level this fall.

S&P 500 daily

edit:

Adding an alt in case the larger W4 did indeed resolve as a triangle.  This would drag the ending-diagonal out for more time, taking it close to FOMC season in September!  Still looking at Q2 GDP as a minor turn, though, but 20 pts higher than the 1st chart.  We would also see new ATHs on the S&P.

S&P 500 alt count with larger W4 triangle

Crunch-time for the Ending-Diagonal

Need a big finish here with GDP, EOQ2, and the holiday break next week.

2823 on the S&P 500 mid-Tuesday would complete the E-D and the bounce since 2009.  IMO the ending-diagonal count still wants a dramatic C of 5.

SPX ending-diagonal

W4 is in -- minor W5 up to go

It looks like W4 from the proposed ending-diagonal count completed at 2744 SPX today.  It doesn't look like we'll make it all the way down to the .382 at 2715. 

It retraced right to the .236 fib of the larger W3, and completed a very nice c of 4 impulse today.  Now there is a nice fib extension upward -- the 1.618 extension of this retrace -- pointing to the 2820 level right into the July 4 holiday.  /ES futures looking good now this evening.

SPX 06-21 ending-diagonal count

When this breaks down, we have channel support at 2430 or so at EOM July, followed by the August 1 FOMC (no hike) and a decent bounce.  The logical target of that bounce would be a retest and hard fail to retake the 200 DMA from underneath.

SPX path to 1810

The actual rate hike at the 9/26 meeting gives us the last leg down to firm support at 1810.  Then we can rally through Christmas, all the way to the mid-January Bradley turn date, before the real credit crisis makes landfall.

The case for 3070 on the S&P 500

I think we are headed to 3070 on the S&P 500.  I think we are headed there this month.

Getting there will piss just about everybody off.

The bears will be squeezed, again and again as they reload their shorts.  Bulls and bubble types will watch this proceed as a true blow-off top, and miss the OTM index calls which return high multiples.

It will be a most hated end for the most hated rally (since the March 2009 lows).

Tonight the /ES broke out of the old bearish channel.  It looks done now.  The overall decline never became truly dangerous and impulsive, did it?  The 2553 W4 low was made right after the Full Moon this past weekend.

/ES breakout

So here's the case for 3070, a true blow-off move into the end of April.

1. It's a 1.618 fibonacci extension of the drop from 2872 to 2553

2. It is the target for a Big W pattern per Bulkowski.  The psychology of this is simple -- we grind our way back to 2872, squeeze anyone covering at the new high, and push unimaginably further north.

3. The blue dotted line, which is the overhead channel trendline on a LOG chart all the way back to the 2009 lows.  IMO we need to test and reject it one last time.

4. The January highs put in historic extremes on RSI for the SPX, indicative of the 3rd wave of the series.  IMO we just wrapped up W4, so now we get the 5th, with higher index values and lower RSI, the final divergence marking the final high.

I still have the pet theory that the next great window for the start of a real Bear market (via a 40% crash back to the 1810 level on the S&P) will be the first estimate of Q1 2018 GDP, due out at the end of the month.  A miss on this would torpedo any remaining illusions of growth and expansion and animal spirits still in play.  Any bounces will be sold mercilessly.

GLTA

It's do-or-die time for the 3K parabola

Have the last two days of sideways tape built up enough tension to launch us north into the January FOMC meeting?  We will need to put in a blistering 140 pts in 4 sessions to hit the 3,000 target, a truly vertical move.

SPX parabola

This is how it ends?

From 3000 back to 1000 on the S&P 500, with all inflection points FOMC meetings

And then one day the clouds disperse and the one true path makes perfect sense.

SPX big turns on Fed meetings

If this chart plays out, I get to spend all summer climbing in the Cascades. 

Insane parabolic finish? 2990 on the S&P next week?

Mrs. Northy put her finger on what seemed too terrible to be true.  We could be at 2990 SPX in 5 trading sessions.  It's set to go even more insanely vertical.

S&P 500 parabola!

Will the 10Y Treasury yield also go straight up?  Serious resistance is up at 3.5% -- rates we cannot afford as a broke, debtor nation.  Equities must be sacrificed to Moloch.

10Y Treasury yield, log scale

The good news is that this can have a happy ending.  After cresting at 2990, we can be back at the 1000 level on the S&P 500 by Christmas.

S&P 500 bounce off Brexit lows, retest, crash

Again we look for the reversal

SPX way above its daily and weekly Bollingers, RSIs out in space, people looking foolish talking about "recovery" and "growth" and inane obvious scams like "crypto-currency".  At this point we're just looking for the high-volume reversal that cements the top.

10Y Treasury yield looks like it's about to break out over a trendline since 1987.  Bicycle sent a link on a possible bond/equity disaster.  And why shouldn't bonds roach and yields break out?  No one in Washington even bothers pretending to be fiscally sensible.

10Y according to Yahoo!

10Y according to investing.com

A .gov shutdown is lurking again, and it threatens to blow out yields, leaving the Fed helpless to watch events play out.  For equities, it's a matter of how soon we retrace to support at 1810.

SPX 2018 crisis

Let's say it all works out through EOY

Let's suppose that President Trump gets his tax cuts, whether he has to cuck on DACA or not doesn't matter at this point, but let's say he at least gets it through Congress by the end of the year.  Once we're on the new, lower, rate on capital gains, for nervous sellers, what reason is there to hold stocks a day longer?

December 28 is the first day when stocks sold will settle under the new rules and rates taking effect in 2018.  The upper bound of the E-D on the S&P 500 is about at 2720 on a log-scale chart.

SPX E-D into EOY

The Fed is expected to hike this week, and the 13-week Treasury bill bears this out, and the Fed should reaffirm its policy plans for 2018.  Once the selling starts, however, and does not abate, we will look for the Fed to retreat at FOMC meetings and try to save the situation.  But the dominoes will be falling and they will play out the last, most severe leg of McHugh's Jaws of Death mega-pattern.

SPX Jaws of Death finale

The elusive, mythical leading-diagonal

Off the 2597 SPX high, we actually have a five-wave decline that could possibly be an elusive "leading diagonal", which is similar to a terminal ending-diagonal, but whose triplets and overlapping waves signifies the uncertainty at the beginning of a directional change instead of its end.  Daneric has suggested these numerous times over the years, each time proving to be a bust, so it's achieved something of a mythical status, a chimera, a unicorn, possibly apocryphal Elliott nonsense.  But we'll give it a shot.

the lion in winter

The market lost steam on Friday precisely at the .618 retrace level of the drop from 2597 to 2557, so we have the remote possibility of both a leading-diagonal and an initial channel south, which will reach its low in the week of the next fiscal cliff deadline, 12/8.  Congress will keep the wheels greased at the 11th hour and rally us through Christmas.

Red /ES tonight would mean we are starting a larger 3rd wave down, which will intensify as the Press fans the flames of a fiscal wreck into December.

SPX leading-diagonal and possible new channel