Today we took out our second important support level and have sold off strong under it. We're in a rally as I write this but it's still inside the expected corrective range.
We still have not net where I'd expect critical supports to be around 5500 but at this point KI feel we do have enough info to make a forecast of what a crash would probably look like.
People always think crash forecasts are hard to make. Top forecasts are hard to make. Accurate forecasts on when a crash break will or will not happen are hard to make. When it comes to the actual swings of a crash when they happen - historically always been very simple to make. If the bull trap low and high is known, the crash levels have always been foreseeable.
For example, when this low and high was known in 2007, all the important levels and the low of the 2008 / 2009 move could be mapped out.
This isn't an isolated case. It's happened in all previous crashes. If you follow my work you'll have seen me trade important levels in drops / lows many times and it's always based on some derivative of this.
If we know the high/low of the bull trap then we can identify the important break level and map out all the levels to the downside that would typically hit.
We can know the zones where there's the risk of this and also know early if the bear setup is failing.
If SPX was going to make a classic break it'd be quite easy to approximate the classic swings we'd have now.
The first continent for this is a wick rejection on the monthly chart, and ideally in the last part of the month. This may be underway now. The selling has to stick with us either going lower or at least holding down - but if things keep going as they have recently we'll have the wick candle.
I recently showed how we tend to have the failure of bullish wick candles before a trend break. In that setup we usually see a big bullish wick candle. Often an attempt to rally and rejection so we have opposing wick candles (bull wick is usually bigger) and after this comes a bearish engulfing candle which is bigger than all the candles around it and takes out the wick low.
That move would take us to about 4500. And almost certainly be news driven.
From here we usually enter into a period of choppy action. It feels bullish and bearish but it's really just going sideways. Often this will end with two big bluffs. First a bluff at being about to break to the downside and then a big spike out of the recent highs.
This choppy action would likely go on for a few months in total with a high somewhere around 5000.
That'd be the last major bull trap and from there we'd start to head into the crash section. During this section we'd travel as much as the full bear swing from high to the current low had taken but we'd do it in a fraction of the time. Over the space of a couple months we'd make a massive news supported capitulation to under the 2022 low.
That'd then complete a 50% drop from the high. Even in extremely bearish setups we tend to get a bounce from around the 50% off the high level and we also tend to get a bounce when we spike out an obvious support zone - so whatever the overall move would be, if and when the 2022 low was spiked out this is around where I'd expect an important low.
This is a step continent trade plan. We can define a marker and if it hits then the bias is towards the next marker.
The first marker was there would be a monthly wick candle.
The following marker would be there is a rejection and close down end of month.
Third marker would be a massive bear candle taking out the wick low.
Fourth marker would be the "Recovery" being muted and stalling out around 500.
If all of those things happen, then the risk of a following breakout becoming a crash event would be high.
In theory, we could be about 6 months from a major crash and we could put in a series of specific markers as warning signs along the way.
First warning sign is there being no V recovery to this selling and the monthly candle closing with a wick.
This post touches on various things that have been explained in far more detail in recent posts. It'd be recommended to read those for full context.
We still have not net where I'd expect critical supports to be around 5500 but at this point KI feel we do have enough info to make a forecast of what a crash would probably look like.
People always think crash forecasts are hard to make. Top forecasts are hard to make. Accurate forecasts on when a crash break will or will not happen are hard to make. When it comes to the actual swings of a crash when they happen - historically always been very simple to make. If the bull trap low and high is known, the crash levels have always been foreseeable.
For example, when this low and high was known in 2007, all the important levels and the low of the 2008 / 2009 move could be mapped out.
This isn't an isolated case. It's happened in all previous crashes. If you follow my work you'll have seen me trade important levels in drops / lows many times and it's always based on some derivative of this.
If we know the high/low of the bull trap then we can identify the important break level and map out all the levels to the downside that would typically hit.
We can know the zones where there's the risk of this and also know early if the bear setup is failing.
If SPX was going to make a classic break it'd be quite easy to approximate the classic swings we'd have now.
The first continent for this is a wick rejection on the monthly chart, and ideally in the last part of the month. This may be underway now. The selling has to stick with us either going lower or at least holding down - but if things keep going as they have recently we'll have the wick candle.
I recently showed how we tend to have the failure of bullish wick candles before a trend break. In that setup we usually see a big bullish wick candle. Often an attempt to rally and rejection so we have opposing wick candles (bull wick is usually bigger) and after this comes a bearish engulfing candle which is bigger than all the candles around it and takes out the wick low.
That move would take us to about 4500. And almost certainly be news driven.
From here we usually enter into a period of choppy action. It feels bullish and bearish but it's really just going sideways. Often this will end with two big bluffs. First a bluff at being about to break to the downside and then a big spike out of the recent highs.
This choppy action would likely go on for a few months in total with a high somewhere around 5000.
That'd be the last major bull trap and from there we'd start to head into the crash section. During this section we'd travel as much as the full bear swing from high to the current low had taken but we'd do it in a fraction of the time. Over the space of a couple months we'd make a massive news supported capitulation to under the 2022 low.
That'd then complete a 50% drop from the high. Even in extremely bearish setups we tend to get a bounce from around the 50% off the high level and we also tend to get a bounce when we spike out an obvious support zone - so whatever the overall move would be, if and when the 2022 low was spiked out this is around where I'd expect an important low.
This is a step continent trade plan. We can define a marker and if it hits then the bias is towards the next marker.
The first marker was there would be a monthly wick candle.
The following marker would be there is a rejection and close down end of month.
Third marker would be a massive bear candle taking out the wick low.
Fourth marker would be the "Recovery" being muted and stalling out around 500.
If all of those things happen, then the risk of a following breakout becoming a crash event would be high.
In theory, we could be about 6 months from a major crash and we could put in a series of specific markers as warning signs along the way.
First warning sign is there being no V recovery to this selling and the monthly candle closing with a wick.
This post touches on various things that have been explained in far more detail in recent posts. It'd be recommended to read those for full context.
We may be inside of a crash event to 3000 in SPX.
Read the full case with backlog of historic analysis/forecasts here: holeyprofitnewsletter.substack.com/p/the-case-for-3000-in-spx
Read the full case with backlog of historic analysis/forecasts here: holeyprofitnewsletter.substack.com/p/the-case-for-3000-in-spx
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.
We may be inside of a crash event to 3000 in SPX.
Read the full case with backlog of historic analysis/forecasts here: holeyprofitnewsletter.substack.com/p/the-case-for-3000-in-spx
Read the full case with backlog of historic analysis/forecasts here: holeyprofitnewsletter.substack.com/p/the-case-for-3000-in-spx
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.