US Equities Double-Double Top: Correction Imminent
Updated
Simple chart, two double tops in July, September. Index repeatedly rejected from 3020 level. Divergence in other indices- Dow, NQ, RUT all below their ATHs.
We got a right shoulder forming from Apr > Jul > Sep. May was an ABC, August a meat-grinding see-saw; IMO October will be a vertical drop to double bottom.
I do expect ONE more rally attempt before throwover, these waves seem to proc in 3's, look back at the waves in May and July, see there were 3 tiny micropeaks on each top, each micropeak was a bit smaller than the previous. At time of this writing futures are modestly bullish and point to a higher open from Friday's mini-panic selloff. This is to be expected and represents an opportunity to close longs and add to shorts. Multiple Bearish signals in candlesticks and technical rejection breakdown point lower.
In May the top lasted from ~first peak April 23 to 3 May, and produced three top-off microrallies on 23rd, 30 and 3 May. This formed a left shoulder, first ATH and was followed by the A-B-C textbook correction.
in July we see the exact pattern reproduced from 12 - 30 July; a second, higher ATH, a taller peak, again with three micropeaks on the plateau, followed by Bloody August meatgrind.
Apr/May triple peak top: ~12 days; July: ~18 days; a little taller and it lasted a bit longer to form the Head, the most Bullish part of the formation.
The August correction from July Head peak was a deep grind, rather than a vertical plummet, and lasted a full month. It was a rough ride for Bulls and Bears alike, we all took a beating getting whipsawed. In a previous idea I observed it could have broken either way, finally the Bulls took charge and broke it up.
September has produced the Right Shoulder peak beginning on 11th with a 12 Sep microtop at 3020 and on 9-19, a second rally attempt attaining the same price on SP500, but lower prices on Dow 30, RUT, NQ and divergence in Transports. The brief love affair flirting with small caps seems to have ended, as IWM sank precipitously in late session. First the pumptards were taking funds out of FAANGs to pump up RUT, but now they're just taking funds out.
Expect a third and final micropump to a slightly lower peak on 9/20 and/or 9/24; The bottom might be expected to fall out sooner than it did on the left shoulder, as right sides of H&S have lower volume, fewer buyers, less bull power and briefer duration. Right shoulders tend to be more pointy and spike down hard when the buyers fail to pump up the prices. No new money is coming in now, only algos are moving funds and rotating them through sectors to churn profits on nickel and dime spreads. This will be a 'bottomless drop' IMO.
This final topping wave should last between 9-13 days; of which 23 Sep is session day 10.
The wave completion Bear confirmation signal will be rejection from the third micropeak rally attempt.
Expect an initial selloff to neckline followed by a retracement rally to provoke a principal Bearish reaction. Cycle evolution ~3-5 weeks.
A double bottom to or below Dec lows would be a strong buy signal for the next and possible final primary Fifth wave to ultimate ATH.
We got a right shoulder forming from Apr > Jul > Sep. May was an ABC, August a meat-grinding see-saw; IMO October will be a vertical drop to double bottom.
I do expect ONE more rally attempt before throwover, these waves seem to proc in 3's, look back at the waves in May and July, see there were 3 tiny micropeaks on each top, each micropeak was a bit smaller than the previous. At time of this writing futures are modestly bullish and point to a higher open from Friday's mini-panic selloff. This is to be expected and represents an opportunity to close longs and add to shorts. Multiple Bearish signals in candlesticks and technical rejection breakdown point lower.
In May the top lasted from ~first peak April 23 to 3 May, and produced three top-off microrallies on 23rd, 30 and 3 May. This formed a left shoulder, first ATH and was followed by the A-B-C textbook correction.
in July we see the exact pattern reproduced from 12 - 30 July; a second, higher ATH, a taller peak, again with three micropeaks on the plateau, followed by Bloody August meatgrind.
Apr/May triple peak top: ~12 days; July: ~18 days; a little taller and it lasted a bit longer to form the Head, the most Bullish part of the formation.
The August correction from July Head peak was a deep grind, rather than a vertical plummet, and lasted a full month. It was a rough ride for Bulls and Bears alike, we all took a beating getting whipsawed. In a previous idea I observed it could have broken either way, finally the Bulls took charge and broke it up.
September has produced the Right Shoulder peak beginning on 11th with a 12 Sep microtop at 3020 and on 9-19, a second rally attempt attaining the same price on SP500, but lower prices on Dow 30, RUT, NQ and divergence in Transports. The brief love affair flirting with small caps seems to have ended, as IWM sank precipitously in late session. First the pumptards were taking funds out of FAANGs to pump up RUT, but now they're just taking funds out.
Expect a third and final micropump to a slightly lower peak on 9/20 and/or 9/24; The bottom might be expected to fall out sooner than it did on the left shoulder, as right sides of H&S have lower volume, fewer buyers, less bull power and briefer duration. Right shoulders tend to be more pointy and spike down hard when the buyers fail to pump up the prices. No new money is coming in now, only algos are moving funds and rotating them through sectors to churn profits on nickel and dime spreads. This will be a 'bottomless drop' IMO.
This final topping wave should last between 9-13 days; of which 23 Sep is session day 10.
The wave completion Bear confirmation signal will be rejection from the third micropeak rally attempt.
Expect an initial selloff to neckline followed by a retracement rally to provoke a principal Bearish reaction. Cycle evolution ~3-5 weeks.
A double bottom to or below Dec lows would be a strong buy signal for the next and possible final primary Fifth wave to ultimate ATH.
Trade active
Looks like index could try for a micro- H&S on the top of the right shoulder peak.Futures indicate persistent bullish sentiment pre-market, up to levels of 12 + 19 September. Now on Day 13 of the formation. Throwover can occur at any time.
There remains a gap to fill back at 2939 from the breakout to this top on 04 Sep.
I reckon support at that gap could possibly conclude bearish move, form a Primary Wave 2 and base for launch into a Primary Wave 3 to new ATH by year-end. I offer this as an alternate hypothesis to the deep correction model.
Foreign investors are taking money out of their own markets for recession fears and moving it into US equities as a 'safe haven' which is an act of desperation, but could prop up markets into 2020.
Trade active
Got the weekly H&S on top of monthly right shoulder filling in. Closed the gap and more selling. Shorted additional position early on with SPX +15 looked like a last gasp.Might hold at first support for a day or two, wait patiently IMO.
Trade active
Doubled down on shorts we're in the third rally wave on top of the peak. This is the final and expected upthrust before throwover. Close your longs now folks! Short early and often! It's going down...Note
Pattern developing around the daily right shoulder on the monthly right shoulder looks just like 3-9 October 2018. Futures indicate slightly higher open; should close this gap quickly and sell could start shortly after it does, absolutely impossible to say exactly WHEN the sell will occur; however here on 26 Sep we are 15 days into this secondary top.NB: ***There is still a gap to fill down to ~2942. IF this is an Intermediate Wave 2, then we could get a strong bull wave out of that support zone. Too early to tell if a Real Bear is started, or whether there's still one Bull Run left in it; proceed with caution! ****
Disclaimer: I cannot predict the future; these are merely inferences and educated guesses. It is extremely risky to time the market and bet on price moves. This beast is notoriously and wildly unpredictable, yet we keep trying to predict it! Take small positions- sizing is everything! GLTA!
Trade active
Nice mini sell in the open 9/26; closed out bear spreads as I see what looks like an inverse H&S in the 5-day chart. Very risky for any trade atm; watching, waiting.Note
Still follows the charted path. If bulls can hold this support level and enough money flows in from foreign markets, we could get a run to new ATH by year-end. Very risky to be either short or long here; in my bones I feel like a bull wave might kickoff from here, we tested TL support, if it holds here this could be an Intermediate Wave 2 in a Primary Wave 5 coming off the Cup & Handle, thus invalidating the Bear hypothesis. Sitting out until we get clear signal; please be cautious traders!Note
Still waiting to see if we get the AM gap filled...Trade closed manually
R/R is terrible now. I fear we may in fact be near the end of a Fourth Wave coming off the Cup, and Handle reached .38 Fibo retracement; any positive news now will spark an explosion to upside. I closed all positions and sit watching for a clear signal.Looking back at 2018 C&H in June, there were several sharp downside moves suggesting impending correction, followed by sharp reversals and terrific rally to ATH.
Could be in for another; the September peak may not be a right shoulder; it might be just another stepping stone on road to ultimate ATH later this year.
Trade closed: target reached
US 30 still holds above the projection but SPY reached 294 at 0.50 Fibo in CUP & Handle, dangling from the tip of Handle now. Could see more Bearishness but IMO R/R is poor now. Took a nice piece of change off Friday shorts and rolled into Calls.FGS Be careful! Position size should be SMALL here guys; keep it Real!
FIY I usually buy into larger positions of 50-150 contracts; I'll do 200 or more when I'm damned sure of the trend; now I've only done 30. My biggest wager: 500 SPY puts and 500 short calls in Dec 2018. That was insane. No discipline then! I got stupid lucky, thanks be to the Bear Gods.
Later I realized the margin call to deliver 50,000 shares of SPY at $270 would be more money than has been minted yet, Dr Evil! (well, just $13.5 million, a bit more than I had on hand atm... E*Trade will let you hang yourself!)
Remember: Bears make money, Bulls make money; Pigs get slaughtered!
FYI this week I had 180 puts on 4 indexes which paid off handsomely. I also did 20 calls on UVXY, which doubled when it went from 23 > 26. Vix cooled off since then; I was sure then; now not so much.
NB: Position size is everything, Destiny is All!
I hedged with 10 daily puts. I'm long on SPY and IWM. Waiting to see if DIA gets to Fibo Monday.
We no-kidding need confirmation of a trend change and pivot before we plunge in here, could still Bear down more, please go easy, don't plunge into this market!
Prudence is the watchword, GLTA!
Note
Creeping along the line I drew; can it break higher? Stepping stones; 3020 >3010 > 3k > dive 2960, bounce 2980, dive 2940, bounce to 2990 in futurez overnight now... back to 298; 296; 294; 292; 290 soon IMO. Then the cascade triggered by trade disappointment (again).Note
Yes 290 looks to be within striking distance. Should find support at 287-288 at least for a few days. Cup and Handle is still evident; this idea is not entirely invalid yet, but breakdown past the breakout point will put an end to it. Handle should not exceed ~half of cup wall height. If it goes beyond 0.62 Fibo it's a broken Cup.Note
A Harmonic Butterfly pattern is evolving. This is a more powerful and compelling formation than Cup/Handle or H&S, which are more likely to be spurious. See my latest post; pattern projects Dow 24,224 by 29 October with subsequent rally to 27,716 by EOY. GLTA!Trade active
We got a 5-wave retracement impulse intraday to close the gap and a topping formation in day chart hanging exactly at 0.62 Fibo. Throwover imminent IMO.See related posts for updates on my positions (now in 80 ATM index puts).
Will add more in AM Tues if higher; adjusted positions today.
Note
Perfect H&S on all major indices intraday now.Note
Space needle Dojij looks like a setup for pinbar on Tuesday...Note
Broke the intraday TL and selloff the rally from teh 0.618 Fibo, EXACTLY on SPX!Death Cross appeared in DJT at the precise same moment, see chart below in comments.
Note
ANother Death Cross in RUT/IWM. Short IWM, QQQ, SPY, DIA. Maybe time to buy calls on UVXY/VIX again!
Trade active
FYI folks closed the position waiting for re-entry. Any gap down stands chance of getting filled and this was a big one, driven by 'trade fears' and global 'fake news', most of which is prepetrated by THe Donald. SO, likley to get at least some retracement. I bought some AMD & GE in covered calls while we wait. Not ready to buy calls just yet but it was time to clos out some puts for ~30% gains. Not bad for a day's work!See my related post on Harmonic Theory. Still not sure if that will pan out or whether we get bounce off the lower TL back into triangle. Very chancy here!
Trade active
NB: Index came to rest EOD exactly on the TL; a break from here will be fatal, IMO;Enetered into 15 contracts to each position in QQQ/SPY/DIA/IWM; now in 45 Nov puts on 4 major indices. See related posts for details. My spreads are not cheap; these trades are neither for the faint of heart nor shallow pockets, but R/R is much better with near and at the money options, and I like to give myself time to win, usually buying 6-8 weeks out. I hedge all these bets with weeklies for insurance and those have paid for my drawdown many times. Debit spreads FTW!
Penny contracts can pop 1000% but 19/20 times they become a total loss.
Moved down so quick I had to roll some of the short legs on Bear spreads, lol.
Always do that for a credit, never need take a loss on those short contracts!
IMO a serious correction can start very soon; now rumors circulating that trade talks have stalled before they started. China is getting irked and hostile, Trump accuses them of human rights violation, they ban our footballers, and tariffs kickoff next Tuesday. IMO if Trump gets pissed at them he will jack tariffs more and blow up the whole mess. A deal now seems a remote possibility at best IMO.
Today Powell told us "THIS IS DEFINITELY NOT QE!" repeatedly. So no more rate cuts, as expected. Hold inflation near 2% and stay the course, he said.
The downtrend course, LOL. Gone short again; GLTA!
Note
Rumor mills grinding fake news; sell-buy-sell-buy; dont' get caught in BS. Just waiting for real news. If Chinese delegation goes home early then sell the Hell out of it!Trade active
The retracement bounce has been vigorous and lasted a week longer than I anticipated, however we have divergence in averages with weakness in RUT, DJT and technicals, volume and RSI have been low and weak. See my related posts.Last time we saw this string of gaps up was 29 Aug - 12 Sep. Been running pretty hot for October past 2 weeks; IMO exhaustion gap and retest the TL and high prices on Tues 10/15. Expect imminent rollover; possibly might still test ATH. I am short!
Trade closed manually
Support held at TL from 2-8 Oct; a pennant is forming, breakout to upside is quite possible:Not behaving as expected. Seems like a push to retest ATH in progress. R/R lousy again; take what the market gives and be cautious:
Seems like bullish undertone persists. Advancers > Decliners; breadth firms up; IMO this beast wants to retest the ATH. Useless to hold shorts while it does this; but too risky to bet that it will. Sidelined again; stop lossed. Look for blowoff rally to re-enter. R/R poor again until we get a clear signal IMO.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.