Trading day #8 after the SPX 2019 has finally seen SPX break down through the 1965 support level. Based on my observation of a typical 5-7 day window for 80-100% of the damage to be done in an initial downtrend, I'd say the bleeding thus far (2019-->1949) could stop at any time but may drop further to 1940 or even 1930.
Given my preferred EW count for 2019-->1978-->2000-->1966-->1986/1985 (I'm now thinking 1986/1985 was a flat rather than another nested 1-2) being 1-2-1-2 or ABCX, I'd say today is wave 3 or AofY down. The difference between the 2 is that a wave 3of3 could be a little more violent and would lead to two wave 4 bounces and two wave 5 bottoms. Either way, these counts also support a further drop to 1940 or even 1930. My calculations on common wave proportions give me targets of 1934, 1941 and 1948.
As "Be Careful" pointed out, yesterday was a large BOW day and today is also so far. My experience is not to see more than a 1-2% move after such readings. Thus, from 1975ish, I'd be surprised to see SPX move lower than 1930-1935. Of course, such readings don't mean we'll get a swift reversal higher and could merely lead to a weak bounce or sideways consolidation for a few days once the current wave's damage is done today or tomorrow. We saw that often during the last year's grind higher. Supporting the weak bounce possibility, the SPX 1965ish area was already the leading price-volume area between 1900 and 2020 and the last few days have exacerbated that. With moving averages and many pivots at and above that area, it will be a tough nut to crack on the way back up especially if SPX can drop to 1930-1940 first.
Russell 2000 is less than 10pts (<1%) from testing its January and May lows. If SPX falls a little less proportionally, SPX could drop 10-15 pts to 1935-1940. Both could see a technical bounce at that point.
VIX is bumping up against resistance/pivots in the 17.50-18 region but it has broken its downtrend and could decide to retest next resistance near 22. If that happens right now, SPX will almost certainly break below 1930-1935 which I'm not thinking is likely for now. So, I'm thinking SPX may just grind a little lower to 1930-1940 over a few days while VIX stagnates or perhaps tests 18-18.50.
IF IF IF SPX is entering a bear market now or after one more high, I suspect the oversold conditions and technicals that triggered rallies over the past few years will no longer work so well.
Considering all of the above, SPX is likely to see one or two 10-15pt bounces as it tests 1934-1941 and perhaps a larger bounce next week. If the next multi-day rally fails below the 20SMA and 50SMA and possibly the heavy volume area at 1965-1970ish, I'd definitely expect VIX to test 21-22 and SPX to test 1905. If those levels break, we'll see a 2011 style correction. Good fortune.
Excellent work.
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