Time Analysis for an SPX Turn Date—November 4-7, 2022?
Updated
Primary Chart: S&P 500 (SPX) Daily Chart with Fibonacci Time Analysis and Fibonacci Price Analysis
This analysis seeks to evaluate potential turning dates using Fibonacci time analysis. Please consider this as merely an exploration of ideas that in all likelihood could be wrong. It's a theory being used to consider a turning point in time where price may reverse and the bear market may resume. So it should be viewed as a sort of drawing pad where rough ideas are being sketched rather than a firm prediction or a guaranteed forecast—which doesn't exist anyway even with most well known technical tools and experts!
One application of Fibonacci time analysis shows a potential turn date in the first week of November 2022, specifically around November 4, 2022. One other possibility would be November 23, 2022, which appears as a .618 Fibonacci time proportion projected from the peak on August 16, 2022. This time analysis, like other technical-analysis tools and approaches, remains subjective as to its application. For example, materially different results appear depending on which highs and lows are selected for the initial measurement and which time proportions / assumptions are used. As a result, other possible high and low combinations could be analyzed yielding a different turn date.
1. Wave A Time Length. The analysis begins with considering the length in time of the first major downward leg of this bear market. In EW analysis, this would be first major wave of decline. The first leg of decline could arguably be said to last from January 4 to June 17, 2022—the pink shaded area on the Primary Chart above with a price measurement attached (-24.52%). For ease of reference, the term "Wave A Time" will be used to describe this first major leg of decline.
2. 50% Proportion of Wave A Time. In the Supplementary Chart below, notice that the green .50 retracement line (in time) for the Wave A Time falls almost exactly at the peak of the major bear rally that ended March 29, 2022. The 50% time retracement or proportion falls one day early, which seems close enough to be important. The fact the most important swing high in the first leg of decline occurred at the 50% retracement may be important in considering the current leg of decline.
Supplementary Chart: 50% Proportion of Wave A Time
3. Wave C Time Length. Next, the Wave A Time (length of time measured by trading sessions or price bars on a daily chart) has been projected from the apparent starting point for the second major downward leg of this bear-market decline. For ease of reference, the term "Wave C Time" will be used to describe this second major leg of decline.
4. Time Equality between Waves A and C. If Wave C Time has approximate equality in time to Wave A Time, a trading low at the end of two major waves down could occur on January 30, 2022. This January 2023 date is where Wave C Time, projected starting at the August 16 high, would be exactly the same as Wave A Time. Note: This assumes (perhaps incorrectly) that this bear market contains only two major legs of decline—Wave A and Wave C (or waves W and Y)—at this larger degree of trend. But this assumption could be wrong for a variety of reasons: one such reason is that the January to June decline could be wave 1 of a larger 5-wave impulse, the August to present date decline could be wave 3, in which case the lasting trading low could fall much lower after waves 4 and wave 5, a larger correction and then another similar 5-wave impulse down after that correction.
5. 50% Proportion of Wave C Time. If Wave A Time and Wave C Time are parallel and proportional (even approximately) in price and time, then Wave C Time's 50% proportion or retracement (or midpoint) should be considered as a possible turn date. Recall from paragraph 2 that this 50% proportion was almost exactly the date in the first leg of decline where the reversal occurred after a bear rally into the end of March 2022. For Wave C Time, the 50% proportion date falls on November 4, 2022. So it will be interesting to see if a material reversal occurs near that date within 2-3 days before or after. If not, then this analysis should be discarded in favor of another time approach (and there are many).
6. Additional Limitations to This Analysis. There are further limitations to t this analysis in addition to the ones already discussed. Note that there are multiple other potential EW counts that could be possible, which is a disadvantage of this form of analysis. EW analysis could end up showing the viability of a different pattern where the first leg of decline from January 4 to June 17 is an impulse wave, the rally from June 17 to August 16 is a corrective wave 2, and the current decline is the start of an impulsive wave 3, requiring further downside for wave 3 to complete as well as a corrective wave 4 and even more downside after that in a wave 5 (unless truncated). This is a very bearish scenario, but at least one EW experts had discussed it as a possibility in previous months.
7. Fibonacci Price Retracements. The Fibonacci price retracements have been drawn on the current decline from August 16 to October 13, 2022. The .50 retracement lies at 3908.43, and the .618 retracement lies at 4006.81. These should be considered along with the dates resulting from the time analysis above. See the yellow circle, where the .618 and .50 price retracements coincide with the .50 time retracement / proportion discussed.
8. Anchored VWAPs May Coincide with Fibonacci Price Retracements in 2-3 Weeks. Lastly, consider the VWAPs anchored to the all-time high (dark blue) and the June 17, 2022 low (light blue), a major low only recently undercut in mid-October 2022. These two VWAPs looks like they are going to straddle the yellow circle to some extent within the next couple weeks. These two VWAPs may provide strong resistance along with the Fibonacci retracements identified in the prior paragraph.
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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
This analysis seeks to evaluate potential turning dates using Fibonacci time analysis. Please consider this as merely an exploration of ideas that in all likelihood could be wrong. It's a theory being used to consider a turning point in time where price may reverse and the bear market may resume. So it should be viewed as a sort of drawing pad where rough ideas are being sketched rather than a firm prediction or a guaranteed forecast—which doesn't exist anyway even with most well known technical tools and experts!
One application of Fibonacci time analysis shows a potential turn date in the first week of November 2022, specifically around November 4, 2022. One other possibility would be November 23, 2022, which appears as a .618 Fibonacci time proportion projected from the peak on August 16, 2022. This time analysis, like other technical-analysis tools and approaches, remains subjective as to its application. For example, materially different results appear depending on which highs and lows are selected for the initial measurement and which time proportions / assumptions are used. As a result, other possible high and low combinations could be analyzed yielding a different turn date.
1. Wave A Time Length. The analysis begins with considering the length in time of the first major downward leg of this bear market. In EW analysis, this would be first major wave of decline. The first leg of decline could arguably be said to last from January 4 to June 17, 2022—the pink shaded area on the Primary Chart above with a price measurement attached (-24.52%). For ease of reference, the term "Wave A Time" will be used to describe this first major leg of decline.
2. 50% Proportion of Wave A Time. In the Supplementary Chart below, notice that the green .50 retracement line (in time) for the Wave A Time falls almost exactly at the peak of the major bear rally that ended March 29, 2022. The 50% time retracement or proportion falls one day early, which seems close enough to be important. The fact the most important swing high in the first leg of decline occurred at the 50% retracement may be important in considering the current leg of decline.
Supplementary Chart: 50% Proportion of Wave A Time
3. Wave C Time Length. Next, the Wave A Time (length of time measured by trading sessions or price bars on a daily chart) has been projected from the apparent starting point for the second major downward leg of this bear-market decline. For ease of reference, the term "Wave C Time" will be used to describe this second major leg of decline.
4. Time Equality between Waves A and C. If Wave C Time has approximate equality in time to Wave A Time, a trading low at the end of two major waves down could occur on January 30, 2022. This January 2023 date is where Wave C Time, projected starting at the August 16 high, would be exactly the same as Wave A Time. Note: This assumes (perhaps incorrectly) that this bear market contains only two major legs of decline—Wave A and Wave C (or waves W and Y)—at this larger degree of trend. But this assumption could be wrong for a variety of reasons: one such reason is that the January to June decline could be wave 1 of a larger 5-wave impulse, the August to present date decline could be wave 3, in which case the lasting trading low could fall much lower after waves 4 and wave 5, a larger correction and then another similar 5-wave impulse down after that correction.
5. 50% Proportion of Wave C Time. If Wave A Time and Wave C Time are parallel and proportional (even approximately) in price and time, then Wave C Time's 50% proportion or retracement (or midpoint) should be considered as a possible turn date. Recall from paragraph 2 that this 50% proportion was almost exactly the date in the first leg of decline where the reversal occurred after a bear rally into the end of March 2022. For Wave C Time, the 50% proportion date falls on November 4, 2022. So it will be interesting to see if a material reversal occurs near that date within 2-3 days before or after. If not, then this analysis should be discarded in favor of another time approach (and there are many).
6. Additional Limitations to This Analysis. There are further limitations to t this analysis in addition to the ones already discussed. Note that there are multiple other potential EW counts that could be possible, which is a disadvantage of this form of analysis. EW analysis could end up showing the viability of a different pattern where the first leg of decline from January 4 to June 17 is an impulse wave, the rally from June 17 to August 16 is a corrective wave 2, and the current decline is the start of an impulsive wave 3, requiring further downside for wave 3 to complete as well as a corrective wave 4 and even more downside after that in a wave 5 (unless truncated). This is a very bearish scenario, but at least one EW experts had discussed it as a possibility in previous months.
7. Fibonacci Price Retracements. The Fibonacci price retracements have been drawn on the current decline from August 16 to October 13, 2022. The .50 retracement lies at 3908.43, and the .618 retracement lies at 4006.81. These should be considered along with the dates resulting from the time analysis above. See the yellow circle, where the .618 and .50 price retracements coincide with the .50 time retracement / proportion discussed.
8. Anchored VWAPs May Coincide with Fibonacci Price Retracements in 2-3 Weeks. Lastly, consider the VWAPs anchored to the all-time high (dark blue) and the June 17, 2022 low (light blue), a major low only recently undercut in mid-October 2022. These two VWAPs looks like they are going to straddle the yellow circle to some extent within the next couple weeks. These two VWAPs may provide strong resistance along with the Fibonacci retracements identified in the prior paragraph.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Note
This chart captures the concept of the measured move where the two legs of the decline are approximately equal in price and time:Note
SPX has rallied right into the edge of the yellow-circle target zone discussed on October 22. Today, it closed at 3901.07 (10/28). In just 12 trading sessions, SPX has risen from 3491 to 3901. Whether it reverses lower at the *potential* time zone date is still very much an open question.
But at least this rally has proceeded as anticipated, and it has reached some of the targets identified on the Primary Chart, especially the $3810 and $3900 targets.
Note
Price rallied to meet some of the bear-rally targets (Fibonacci resistance levels) discussed in this post, including $3810 and $3908. Price was unable to reach the .618 retracement at 4006. SPX's price also moved well into the yellow circle shown on the main chart and spent 3 days within that circle.
Today's selloff after FOMC seems as if it could be the start of an important turn—we'll have to see what happens tomorrow and Friday to whether this move follows through.
The timing analysis was presented as a set of rough ideas, a sketch of sorts, rather than a firm forecast. But it appears price has turned within 2 days of the November 4 timing date. Whether this turn represents a move back to new lows remains uncertain, but a -2.50% decline in SPX and -3.43% on NDX suggests a material shift in direction in the short-term to intermediate term.
In other words, today's selloff was at least a minor turn, which happened about 2 days before November 4, so the timing date may have had some significance after all.
Note
The "Santa Rally phenomenon is real" says Imran Lakha, an widely respected options and volatility expert followed by SquishTrade. But Lakha cautioned that if searching for positive year-end seasonality (a Santa Rally) and filtering the results by bear market years, the numbers don't look as strong. The chart he showed contained a bar graph and the bear-market years had a 57% chance of negative performance into the year-end seasonality period and a 42% chance of a Santa Rally. This seemed important to pass along in terms of probabilities. So it's almost 50/50 for a rally vs. a decline according to this data, but with a slight edge to the bearish side for the year-end seasonality period.Another interesting point made by Lakha was that previous bear markets that have reached 220 days (as this one has) have tended to bottom another 100-150 days later (after the 220 day mark), on average, and at 15-20% lower prices.
Trade closed manually
Partial success, partial failure. Success: the yellow circle as a target area has been reached twice.
Failure: the concept based on Fib time analysis that SPX price would reverse lower materially (as discussed above) around the .50 time proportion based on the first leg of the bear market applied to the second leg. No major reversal occurred at the .50 time retracement. SPX reversed lower after the FOMC meeting in a sharp 3-day decline that ended up being corrective within the larger structure of the rally off the 10/13 lows.
The original post contained this disclaimer about the timing aspects, which ST viewed as a bit speculative: "Please consider this as merely an exploration of ideas that in all likelihood could be wrong. It's a theory being used to consider a turning point in time where price may reverse and the bear market may resume. So it should be viewed as a sort of drawing pad where rough ideas are being sketched rather than a firm prediction or a guaranteed forecast"
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