It's arguable whether the 3-week triangle ended at 2105, 2103 or possibly even 2096, but my 2 additional confirmation criteria have now been met. (1) The SPX 200SMA has been convincingly broken with a gap down after SPX closed on the 200SMA yesterday and without a late-day recovery. (2) The SPX 2044 support pivot has been broken.
I should also add the drop today of 39pts thus far would currently place it in the largest 5 drops in the last year as the setup suggested was possible. Also, interestingly, the 2103-->2071 drop and 2096-->2040 drop (thus far) are approximate Fib numbers 34 and 55.
If the downtrend officially began at SPX 2105, it appears we have a 1-2-3 or a 1-2-1 completing at 2040ish. I believe the next drop will either complete a 1-2-3-4-5 near 2020 or a further nested 1-2-1-2-1 near 2020. We may get clarity on the next bounce which should start today or tomorrow. If the bounce clears 2071 or its equivalent in Dow, the odds favor the nested 1-2 scenario. If the bounce falters at 2055-2065 or at a 23-38% Fib retracement, the odds favor the 1-2-3-4-5 scenario. Either way, I expect a back-test of 2040ish or even 2060 from 2015-2020 or lower before the wheels come off. SPX could easily reach my initial 1922-1951 target area in 1-2 weeks likely before Labor Day weekend.
Bulls will hope the current drop to 2040ish completes an ABC downtrend. We'll need to convincingly clear the 200SMA and probably 2103+ before that scenario would be favored. For reasons I've posted over the last few months, that is unlikely. If anything, I think an immediate gap down near 2020 is more likely than that scenario. Good fortune.
P.S. After the close, SPX ended up falling the 2nd most of the year. Friday OPEX is almost certainly speeding up the move, so I expect things to calm down overnight or perhaps after another morning gap down....but only temporarily perhaps for 2-4 days before the heart of wave 3 starts. Also, today was a 2nd BOW day, and that usually keeps downside in check....key word being "usually". Finally, the year's previous 5 worst point days (sorry I missed the 58pt drop on October 15th 2014 due to its intraday recovery) bounced a maximum of 9, 10, 14, 17 and 27 points the next day from the close although some went lower first. With a close at SPX 2036, that would equate to a rally at some point tomorrow to 2045-2063. Good fortune.
P.P.S. BTW, with the SPX drop to 2013 this morning, I feel obligated to mention that there have been many occasions even during the bull market when large down days like yesterday did not rally back above the close within a day or two. My stat only covered the largest down days from the past year. Personally, I closed my shorts and nibbled long after-hours and took a big bite this morning at 2015 only for a day trade to be closed Fri/Mon. Cascade risk is high, but it is possible to count 5 waves down from 2103 in which case there is a reasonable chance for a rally back to 2060+ or even the 200SMA+ which likewise fits the stat I posted last night. Good fortune.
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