SPX and Dow made new lows for this downtrend minutes ago. Short-term, I have seen some very extreme fear/sentiment readings in multiple indicators over several days now which lays the groundwork for a bounce, and now we have a potentially completed pattern with positive divergences, oversold technicals and an upcoming monthly OPEX next week. VIX has also been (temporarily) stopped at 17.50-18 resistance yet again.
In EW terms, SPX has potentially completed an ABCXABC (or is nearly completed) in which case SPX could rally back to 1960-1990 into OPEX max pain. This scenario would reasonably match the year 1987 pattern. The double zigzag could also totally complete the downtrend, but I give that low odds for many reasons I've covered. Another scenario is that SPX has completed a 1-2-1-2-1 and possibly even one nested layer deeper in which case SPX should rally back to 1945-1978. All scenarios allow for a rally back to as high as 1978.
One side of me has a hard time seeing a rally back to the previous 1978/1986 downtrend pivots that then fails miserably and quickly, but it would be the type of surprise to catch the most traders off guard. It would only require a 2.5%+ rally in SPX. Europe, small caps etc won't necessarily bounce as much. VIX, sentiment and technicals could reset, Mr. Market could make its OPEX money and my System would be setup for a short opportunity on any rally back to or slightly above key moving averages (1975-1985) which then turns down below the last 4 hourly candles into the top. The 1965ish area should accumulate more price-volume making it a tough nut to crack in either direction once we get more than a 2-3% move away from it.
Sorry I did not get this posted before lunch...work got in the way. :) I'm favoring a rally into Wed/Thu/Fri next week and then a collapse into Nov/Dec. Good fortune.
I'm thinking rise into OpEx then we fall. Could be wrong!
ReplyDeleteThanks for the commentary & keep it up :)