Watch 3333 , then 3385
Notice how despite briefly breaking 3333, we couldn't close above it on Friday... 3333 is the 1.618 extension of the winter 2018 selloff, and an important technical level to watch. If SPX has a daily close above this level, it removes the likelihood that the entire 2019 rally is a 5-3-5 corrective wave B of a possible expanded or running flat. The pivot here will determine just how far this pullback will be, so... 2 scenarios:
Scenario 1 (less likely): The market can't get a daily close above 3333 and we start the reversal. Unless semi earnings/guidance are complete trash, I don't really see this happening, but the market does love ambiguity, and turning around here opens up the possibility of a lot of different scenarios. If the entire 2019 rally is indeed wave B of a flat, then we're looking at an impulse retrace to at least the 2700s. The retrace could also simply be a wave (iv) of 3, which means it won't get much further than 3150. If we head below 3300, then a reversal has likely started.
Scenario 2 (most likely): The market seems like it WANTS that 1x1 45deg line that has been the upper TL for the majority of the entire bull market from 2009. We tapped it for a day in Jan 2018, and it seems only fitting that the index seeks it here given how close we are. A date w/ that line puts us around 3385-3400 this or next week. If we do make it up here, that's a MUST SELL level. Having broken the 1.618 retrace, it cements the current rally as an impulse and a pullback will be steep but brief... something like 3180-3200 before continuing higher.
Notice several Gann elements here on the chart:
1) The 1x1 red line - strong resistance
2) The resistance arcs from the Gann Square which has acted as important resistance/support. 3333 sits right at the start of the 5x0 Gann Arc. We'll likely get a little scare here early this week to shake some bulls loose, but I don't think we'll crack 3300 this week.
3) The purple channel at the 1/2 angle - Again it looks like we're at the top of this channel, but I think we're gonna get some kind of blow-off top this week for that final wave (v).
I'll add a micro chart to watch wave counts of this final wave (v).
Scenario 1 (less likely): The market can't get a daily close above 3333 and we start the reversal. Unless semi earnings/guidance are complete trash, I don't really see this happening, but the market does love ambiguity, and turning around here opens up the possibility of a lot of different scenarios. If the entire 2019 rally is indeed wave B of a flat, then we're looking at an impulse retrace to at least the 2700s. The retrace could also simply be a wave (iv) of 3, which means it won't get much further than 3150. If we head below 3300, then a reversal has likely started.
Scenario 2 (most likely): The market seems like it WANTS that 1x1 45deg line that has been the upper TL for the majority of the entire bull market from 2009. We tapped it for a day in Jan 2018, and it seems only fitting that the index seeks it here given how close we are. A date w/ that line puts us around 3385-3400 this or next week. If we do make it up here, that's a MUST SELL level. Having broken the 1.618 retrace, it cements the current rally as an impulse and a pullback will be steep but brief... something like 3180-3200 before continuing higher.
Notice several Gann elements here on the chart:
1) The 1x1 red line - strong resistance
2) The resistance arcs from the Gann Square which has acted as important resistance/support. 3333 sits right at the start of the 5x0 Gann Arc. We'll likely get a little scare here early this week to shake some bulls loose, but I don't think we'll crack 3300 this week.
3) The purple channel at the 1/2 angle - Again it looks like we're at the top of this channel, but I think we're gonna get some kind of blow-off top this week for that final wave (v).
I'll add a micro chart to watch wave counts of this final wave (v).
Note
Micro wave analysis here zoomed up on same elements shown in the macro chart. Currently melting up along the 1x8 Gann angle (just like Jan 2018). Expecting some kind of 3 drives here to finish out wave (v). Note
Turned away once again today at 3333. If we suppose that that was the end of wave (iii) and applying the EW principle that wave 3 cannot be the shortest wave, we can extrapolate that if we bounce from around here that a "lid" on the current rally can be extrapolated to be around 3385-3390. Let's see what tomorrow brings... my guess is a gap down in the morning to scare ppl, but we move back up to finish wave (v). A breakdown below 3288 and I think that's all she wrote for this rally.Note
Here's another interpretation assuming wave (ii) was actually a running flat (quite possible) and that we might still be draw the 5th wave of (iii). In either case I doubt wave (iii) will exceed wave (i) in magnitude and thus once (iv) completes we'll get a clearer sell target.Note
3333 has thus far proven unpenetrable for the bulls which makes me lean bearish. Not to mention that huge engulfing candle today. Here's my bearish scenario for the upcoming week. Note the bullish shark formation that we bounced out of... my guess is here we draw some kind of flat (most likely an expanded just to make everybody nervous) and it parks at the end of close Monday around 3305. A rejection from that level would activate the shark to 5-0 which gives a measured move to the bottom of the channel by the end of Tuesday.Note
Despite being bearish, here's what I think will actually likely happen (because it feels unlikely, cuz that's how the algos getcha)... and because a few things line up here. So, here's the bullish scenario. Today's action tells me a few things:
1) If today was indeed part of wave (iv) of 5 up and not wave (i) of A down, then it being a sharp meant likely wave (ii) was a flat. And you can see here that it clearly looks like a running flat.
2) So given wave (i) has been the longest, wave (v) cannot exceed the length of wave (iii), so that puts a lid on the current wave v at around 3346. (SELL THE 335 SPY CALLS!) I've overlaid wave (iii) as a hypothetical wave (v) for reference.
3) What's interesting is that wave iii of 5 (starting 10/9 and ending 12/2) was a move of 277.4 pips. If you assume that wave v is equal to wave iii in length (measured move) that ALSO puts the end of wave v at around 3346 (thick red line)
4) So given that the market now thinks we're at the onset of bubonic plague, and everybody's rushing to go short, I'm expect one last "WTF" higher high to 3346. We should know by Wednesday... 3310 is the control.
Note
Despite the monster short covering rally I don't think we're done here... December has been extremely thinly traded, and I don't think this pullback is over until we hit the .382 retrace around 3150.Watch for a topping formation here in the next several days. SPX looks to be painting an ABC flat where wave C typically retraces 61.8/100/123.6% of wave B. It's already gone past B so I'm presuming wave 4 ends around 3308-3310.
First target is the 13WMA near the .236 retrace, 3220 or so. If the index can't overcome 3310 by next Wednesday, I believe we'll see a wave 5 by the following Monday.
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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.