In light of my last couple posts, this post could be viewed as being open-minded or fickle, but, in keeping with my overall thesis of an October low near 1700 followed by year-end consolidation with a high in November and a Q1/Q2 parabolic collapse to SPX 1100ish or even lower, I can see another viable option of a huge triangle into October 16th OPEX +/-. It would sync some of the index counts and replace the 1-2-1 option from 2021 with another ABC and align with some of my other thoughts. Here is the potential count.
1867-->2021=A of triangle=3+ weeks
2021-->1872=B of triangle= 1.5 weeks (Dow retraced about 70% vs SPX 97%)
1872-->????=C of triangle (1945-1975????)
In this count, today's high of 1927 is not likely enough of a corrective retracement, so I'd expect a double or triple zigzag to at least a 50-70% retracement which is 1950-1975.
What I like about this count...
1. It screws up count expectations. It would allow SPX to drop below the 1897 pivot today/tomorrow if it wants to and then back above the 1953 pivot next week if it wants to which would screw up almost everybody's counts on the bull or bear side but fits perfectly with an expanded triangle. Mr. Market wants everyone's money so I expect one or both of those levels to be breached in this count.
2. It screws up pattern expectations. It differs from the 2011 scenario that most people are watching which produced more of a complex flat before slightly breaking the lows and then rallying hard. And it differs from the 2008 and 2014 scenarios some people have pointed to.
3. It fits my target SPX 1700ish in late October. A triangle would be expected to produce a post-triangle leg equal to the pre-triangle leg projecting to my 1700ish target. If the triangle were to end around 1950, we'd get 1950-(2100-1867)=1717. That is near my 1700ish target where several key indicators reside: the bull market uptrend line, Fib 38% correction, Dow year 2007 top etc.
4. It fits my target SPX 1950ish max pain in mid-October. It would allow the market to hit max SPY option pain around Friday October 16th OPEX as I've proposed was likely this month despite my expectation of lows in early and late October surrounding that date. Currently, max pain is dropping to 1980 and lower. Other expirations are near 1950 and I expect max pain to end up at 1960-1970 under this triangle count or lower if a large down leg occurs first. A final triangle wave E into October 14th-16th near 1950-1970 would seem to fit perfectly.
5. It fits the timing better of the previous waves in my count. 2133-->2045 was 7+ weeks. 2045-->2103ish was 5+ weeks. 2103-->1867 was 1 week. No matter how you slice it, the total for 2133-->1867 was 13 weeks. It would make sense for an X wave to take 8 weeks which is what October 16th +/- would be. If you count the top as 2133, you have 1 week, 3 week and 1 week waves which would support a 4 week wave-X but a Fib 5 week ABC followed by a Fib 8 week X-wave is also supported. Aside from this ABCX count from the top, I've also stated 50% likelihood for a 1234 count and, using 2133 as the top, you could see a 1-week wave 5 matching 1-week wave 1 and 1-week wave 3 under that count.
6. It should relieve oversold/sentiment indicators. Many people have presented stats and surveys with extreme bearishness that typically results in a bullish reversal. Triangulation should relieve those indicators under bear market conditions for the next large down leg to begin.
7. It fits my larger expectation of year-end consolidation with a November high followed by SPX 1100ish or lower in Q1/Q2 2016. A triangle usually portends a final move lower or higher for the degree of trend at hand. If the triangle targets the lower 1700s as I've calculated, that appears likely to occur in the last half of October. After that final move lower, we'd expect a large multi-week oversold rally as supported by my spending indicator calling for a significant late October-to-late November high. I was thinking SPX might triangulate in Nov/Dec but if this triangle count plays out, it seems unlikely to be followed by another triangle. Perhaps a flat or complex zigzag with failed final leg or a quick ABC followed by nested 1-2s into January would allow for the high to occur in November with consolidation into year-end. Whether that rally into November completes a 1-2 from the market top or an ABCXABCX, it allows for a drop to 1100ish, but the 123 count probably fits better with such a large drop and my overall call for an exponential parabolic drop in keeping with the trend since year 2000. Going further than I think I've posted before, I kinda expected SPX 1100s would finish A (or W) from the top followed by a multi-week or even multi-month B (or X) and then a C (or Y) to SPX 667 or lower. A count that says 1867 finished a wave 3 with wave 4 completed at 2021 or perhaps at 1950-1970 in the triangle count I've proposed may fit better but I'll just keep a 12345 or ABCXABC to 1700ish as 50% odds each for a little while.
All in all, there is much to like about an expanded wave 4/X triangle count from SPX 1867 into October 16th +/- around 1950. If SPX 1953 is surpassed OR if SPX 1897 is broken with 1927 subsequently surpassed, I will likely prefer this triangle count over all others and post a chart as such. Until then, a wave 3ofAofY or 3of5of1 down into next week is possible. Either way, the price range is large, so expect volatility even if VIX grinds lower in the triangle scenario. Good fortune.
P.S. Update Fri Oct 2nd 2015 935AM EST:
SPX has gapped down and breached the 1897 pivot. As I stated above, I actually thought this was likely under the expanded triangle count followed by a rally above 1953. However, the expanded triangle count is eliminated below 1872, but, better than that, I think it is eliminated below Dow 15944 which is the equivalent of ~1887 SPX. So, personally, despite my admonition to not buy dips, I have exited my shorts and taken a long position....but I have only done so because there is such a low-risk 6-7pt stop available with 60+pt gain potential equaling a 10:1 reward:risk ratio. Still, I will keep in mind as you should that a large move down is ultimately expected soon and my other counts allow for that to happen now. Let's saee which way Mr. Market decides to take us. The gap down induced by the bad jobs number has probably emboldened the bears and scared the bulls, so it makes sense for Mr. Market to screw everybody by rallying but price will tell us. Good fortune.
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