SPX likely made a short-term bottom at SPX 2040. It is not certain the current rally will make new highs but the projected EDT 5th wave suggests SPX will reach 2120+ with max 2178. Truncation is also possible but 1-3 weeks more time and 1-3% more price is the projection.
Up to now, I've focused on my consumer discretionary spending signal as the reason for a significant 8%+ drop coming in March-May with late March to early April being the bullseye top time window. And, of course, you're aware of the historic length of the bull market built on the backs of high QE, low interest rates, spending-at-the-cost-of-savings and debt stability which are all threatened again and have probably peaked. And I've mentioned the fact this is by far the longest since year 1900 that Dow/SPX have surpassed their old all-time highs by ~10%+ without retracing most of that differential. In other words, a 60-80%+ retracement of SPX 1576 is just a matter of time which is wearing thin. This aligns perfectly with my projected EDT's origin of SPX 1820 being the minimum price target area. and of course 1500-1700 is possible.
Today, I'll focus on the US Dollar (USD). There is a common belief that once the USD takes a breather, the US stock market will rally. Looking back over the last 10-15 years suggests that is reasonable. However, (1) there is usually a delay of many weeks between USD and SPX and (2) the USD may not be done rallying since we're at a key inflection point with the world easing and the US tightening. Either way, even if USD 100 on Friday marked an intermediate-term top, SPX likely has 3-6 weeks of weakness ahead. The 2 most similar scenarios I see in the last decade occurred in Oct 2008 after USD rallied 24% in 4 months and May 2010 after USD rallied 18% in 6 months. The current rally is 28% in 9 months. In the previous 2 scenarios, SPX continued 25% lower (1000-->750) and 10% lower (1100-->1000) for a month or so. The difference in those 2 cases versus today is that SPX had already been falling as the USD rose in those 2 cases and the current 9-month USD rally has instead corresponded with a choppy 10% SPX rally. Does that mean this time is different? I believe it just means we'll get most of the drop in a 1-2 month time frame. And, it also means we may get one more all-time SPX high over 6-12 months while USD consolidates.
Still, this is what distribution tops and EDTs do...defy the inevitable for longer than expected. All factors, to me, point to a SHARP drop coming. Maybe today's rally will not go much further but I'll stick with the EDT scenario until proven otherwise. With EDT truncation possible, once SPX starts testing 2100 and especially if it approaches 2120, your Danger Will Robinson lights should start going off. Good thing is we have an EDT hard stop at 2179 and a likely 4-6 week time frame with 10%+ price drop, so the reward-to-risk ratio appears extremely high with a short time window and likely USD:SPX delay. Perhaps the Fed statement this week will goose the final rally or top and the upcoming spending report will start/accelerate the decline into the April 29 Fed/GDP or thereabouts. Good fortune.
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