From January 2015 until the large drop in August with volatility conditions similar to today, there were 10 small downtrends of more than 50pts evident on a daily SPX chart. They ranged from 58 to 101 points averaging 75 with a median of 73. If I exclude the largest drop in January, the average is 72 with a median of 69. So, I think a drop of 72pts would be a good approximation of the typical drop in 2015 with low volatility. The list of drops can be found below.
If SPX 2022 marked the top of the recent uptrend, the downtrend could sensibly reach 2022-72=1950. OEW has a pivot at 1956 +/-7 and there is gap to fill at 1951 with 1947 being a 50% retracement. If this downtrend were to be on the larger end of the range of 86-101pts at 1921-1936 which is probable given the wake-up call in August and size of the rally, it would test another OEW pivot at 1929 +/- 7 and it would test the 62% Fib retracement at 1929. So, if a downtrend has begun, the sensible target based on recency is 1921-1956 with 1929 and 1950 being the bulls-eyes.
The length of those downtrends varied from 4-14 days with the average near 8 days, so the downtrend could sensibly end next Thursday +/- 4 days. However, if this downtrend intends to fall in the 80-100pt range mentioned above, those larger downtrends actually occurred in the least time...4-6 days. That would allow for a downtrend low between Friday and Tuesday. Given max OPEX pain on Friday October 16th near 1990, I tend to disfavor a Fri/Mon low. However, I have often mentioned that I consider the max pain indicator fulfilled if that price is reached within .5% on the Wednesday before Friday expiration since most people won't wait until Friday to make their final trade. It just so happens SPX is trading in the 1990s on the Wednesday before OPEX, so I think the market is now free to do what it wants. Max pain worked again although with a different path than I projected.
Taking that all into consideration, I think the odds highly favor SPX reaching 1950ish between this Friday and next Friday and probably as low as 1929ish next week. Since I am still looking for a significant low in late October with target of 1675-1750, the market likely needs to hit 1929ish by next week for that to occur. Both October 2014 and August 2015 witnessed 150-235pt drops in 5 days, and that's what it will take to reach my target. Obviously, I will adjust my short-term projections if time and price don't cooperate, but my long-term call for a parabolic drop into Q2 2016 +/- remains favored as long as SPX cannot retake that 2040-2060 capitulation zone. Good fortune.
2093-->1992 Jan = 101
2064-->1988 Jan = 76
2065-->1981 Feb = 84
2120-->2040 Mar = 80
2115-->2046 Mar = 69
2126-->2068 May = 58
2135-->2072 Jun = 63
2130-->2044 Jul = 86
2133-->2064 Jul = 69
2114-->2052 Aug = 62
S2, hope you are well, looking forward to your next post. Well my call of max of SPX 2020ish was dead wrong. I really didn’t think they would let out long term bulls who had trapped positions above 2040. But, over past couple of weeks those positions have been distributed to those expecting new ATH, not going to happen IMO. Yesterday was top of some sort of C wave, decline should start this afternoon. Looking for retest of Aug 24 lows by mid-Nov, mid-1700s if that Aug low is breached. Then a huge rally (QE4?) to end of year, peaking just before Christmas, then a historic parabolic move down into 2016 as you’ve described. Best of luck.
ReplyDeleteS2, miss your posts, I do hope you are well. You’ve always had good info to share, some truly great analysis, of which some important parts of your work definitely corroborate my model work. Anyway, speaking of your previous great analysis, back to your post on Sep 23, of the 22 decline cases that you listed, which 4 had a full retracement similar to what we just had that topped at 2116 last week? You mentioned 2000 as one case, what were the other three, and how do they compare to our current market action?
ReplyDeleteHey Brigadoon, I made a new post. I think the test of the 1700s is delayed until at least the December Fed meeting and probably Jan/Feb depending on what happens with the next rally. And, I'll address your question about the Sep 23rd analysis in a separate post.
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