Short

Updated

End of hibernation for the bears?

is at a pivotal point and could potentially be at the top of the bullish cycle that began in October 2022. If this prediction proves accurate, I think we could see a maximum low of $510 for this year. There are a couple of caveats, including one that will be a clear indicator of whether or not this wave count is accurate, which I will explain later.

On the 1000R chart ($10), this uptrend was confirmed by Supertrend and volume activity. Volume drastically increased at the start of Wave (3) in March 2023 and did not taper off until the start of Wave (4) in July 2024. This was the strongest impulse in the trend, which is common for Wave 3. You can also see the ADX line of the DMI indicator (white line) was at its highest level during that period.

Assuming Wave (5) is already complete, we can observe that the volume in Wave (3) was considerably less than Wave (5).

Other observations supporting this wave count:
- Wave (4) retracing into the territory of Wave 4 of (3)
- Alternation in corrective patterns between Wave (2) and Wave (4); flat in (2) and straight down in (4)
- Wave (5) extending to nearly 1.618 of (1)

While the points I’ve made so far suggest that the market may be on the verge of a crash, the image gets more complicated when you take a closer look on the 250R chart ($2.50). I’ll start with what I’m counting as Wave 4 of (5). The price ended at ATH in Wave 3 and then corrected in an unmistakable five wave descending wedge pattern. This can only be a fourth wave of a larger impulse, so we can conclude with a fair amount of confidence that the wave that follows will be the last.

Here is where things get interesting. The price moved from $575 on January 13th to a slightly higher ATH of $609.24 on January 24th before being rejected again. This uptrend unfolded in a typical bullish pattern and left a notable gap at $584, which is the only gap still left unfilled. The trend change is confirmed on the moving averages. Notice the serious drop in volume that followed as well.

Despite the shift in volume, there are two issues I have with this wave count that are preventing me from calling this a confirmed correction:
1. Wave 5 of (5) was awfully short and only extended roughly $2 above the end of Wave 3 of (5). This does not break any rules, but it is unusual.
2. What I have labelled as Wave B of Wave (1) or (A) of the correction made a new ATH on Friday February 14th, which should invalidate this wave count since the end of Wave 5 of (5) should be the peak.

The second point is why some may think that we are about to resume the larger bull trend, however there is a possibility that they are mistaken based off the PA on the actual index and futures . On the chart, we can see that the index did not break the ATH at $6128.18 set on January 25th, and instead rejected at $6,127.24.

also failed to notch a new ATH on Friday and I have observed the price action create a nearly perfect bearish butterfly pattern. Also notice how the volume is significantly lower than in the uptrend that began on January 31st.

So the question remains: are we at a tipping point or will the bulls regain control? Right now it’s unclear, but I will keep my bearish sentiment until makes a new ATH, which will invalidate this theory. Since only the ETF that tracks it only made a slightly higher high on low volume, I’m skeptical of the PA on at the moment. This is why I entered puts on Friday.

If the trade plays out, I expect the price to quickly move to fill the gap at $584, which is still conveniently located at what I cam considering the 1.236 extension of Wave A, which is a common target extension in flat corrections. I will keep my puts open until this idea is invalidated, as the Wave C drop will likely be caused by a news event that could come at any time. Let me know if you guys are seeing the same thing or something different. Good luck to all!

Trade active

has completed the first wave of the larger bearish trend. The price unfolded in a corrective 3-wave zig-zag pattern labeled ABC and Wave (c) of A terminated at the 1.236 extension of Wave (a) after closing the gap at $584.

My indicators are also confirming that the price reversed on Friday. The low bounced off the 200MA on the 500R ($5) chart ($582.44) and moved past the “P” pivot. There is also slight bullish divergence on SMI.

Since we are currently in Wave B or 2 of the downtrend, the price should retrace to 61.8%-123.6%, or $602-$620, respectively, of Wave B. Since the range is so wide, it will be important to look for clues as it progresses. The most likely scenario I am considering for now is that will advance to the “R3” pivot around the 0.764 retracement of Wave A. There is a small volume gap to fill at $607, which is what I am setting my target as.

As for where to enter, I resisted the temptation to chase the afternoon rally to determine whether or not it had enough strength to be considered a reversal. The price is currently well above the 200MA on the 100R ($1) chart and well overbought on SMI, however the rally was supported by volume and ADX/DMI, so the uptrend should continue after a pullback.

This is just a guess, but assuming Wave B unfolds in three sub-waves and Wave (c) of B reaches the 1.236 extension of Wave (a) of B, and that Wave B retraces 61.8% of Wave A, I think the price could form a path similar to my drawing.

We could see a rise to $597 by Monday morning before the price falls to around $590 before one last push to $601-$607. If this were to play out, Waves (a) and (c) of B would be equal in length; around $15.55. All of this to say - if you missed the reversal on Friday you may get another opportunity to ride the same wave up this week, however it is best to be patient in this volatile and uncertain environment.

It seems likely that will see a deep correction this year, and should reach the $550-$570 range - perhaps even lower. 2025 will be the Year Of The Bear.

Trade closed: target reached

Chart is inverted - indicators are not.

I was definitely wrong about last week being the reversal point. Monday 3/10 opened lower and continued to break down throughout the day. Inside of the larger Wave A of the downtrend, I think this was the start of Wave (c). I expected Wave (b) to retrace Wave (a) more significantly last week, however what played out appeared to be a range-bound flat correction. Monday's action was more directional, similar to what we saw in late February, which suggests that we are in the final impulse of the first leg of the downtrend.

I think this can go much lower. If Wave (c) is to be equal in length to Wave (a), we could see reach $536 or lower before a major retracement. For Tuesday I am targeting $565 to enter puts for the remainder of the week. This idea is subject to change depending on where we open after the JOLTS report, however I'm hesitant to bet against the downtrend until we see a larger bottom form.

ap769

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.

ap769