Are we here?

Updated

This gives an idea of what I'm thinking/seeing in the scenario that we're in the very early stages of a much needed market right-sizing. If we subscribe to that notion, and look back at the most recent period with similar characteristics (2008), then I'm wondering if we just might be around the area marked on the overlay. It lines up in pretty well in terms of timeframe, but more importantly follows a pretty notable double-bottom pattern followed by a perceived shift in momentum back to a bullish trend signified by the cross of the 13 ema above the 48 ema on the daily timeframe. Ultimately this was short-lived as the market encountered a down gap (anything look familiar there?) which sent it packing back where it came from and the rest is quite literally history. Could be grasping at straws here, and this will certainly be invalidated if the current bullish momentum continues and we take out the remaining down gap and continue upward. However, if this plays out in a similar fashion, then I see us potentially continuing to grind upward toward the 458-460 level, maybe even up to ~463 area in an attempted gap fill before beginning an inevitable descent to the 300s and potentially even below.

Note

Not planning to update this daily since it plays out over a long timespan, but I'll be checking back in periodically to see how we're trending. So far so good. The *only* thing that could have prevented that daily 13 ema crossing up above the 48 would have been major tankage today which just wasn't realistic. Yes, these are trailing indicators, but they still predict future momentum and the market will respect that cross. I do think we see a little pullback some time next week, probably by Wednesday at earliest, because this has run very hot and we need to re-test the 440s, but I'd be surprised if we see below 442-444. If somehow we break below 440 I expect 438-439 to be bought up aggressively, and we make our way up toward 460 to reckon with that gap. From there, I think this fizzles out and starts a long and painful downtrend out of the 400s. If by some crazy chance we break above that level then all bets are off, this idea is worthless, and I'll be back to the drawing board.

Note

Thought about making a fresh post, but I think I'll continue to update this one for a bit until things play out one way or the other. Overall this week went more or less to plan, although we ran up to that gap area around 460 much quicker than I expected, before pulling back for the expected retest. This just meant the retest did not come as low as expected, but we still saw our 440s. I just followed the price action we were given and had a green trading week.
Looking forward, I think we'll start to push back up toward that 460 gap now that things have reset a bit. There was no notable follow through from sellers, VIX closed below 20 for the first week since January. Daily chart threw a strong reversal hammer at 13ema support, and we regained some key moving average levels which favor buyers going into next week. I expect to see prices get back up to that gap zone by mid-to-late next week, and then a much stronger rejection, possibly double top to get the reversal started some time the following week. Of course timing can shift slightly, but I'll check back in next Friday to re-assess.

Note

Checking back in for an update. As I look at this more, I suspect we've seen the last of the 460s and gap fill attempts for a while. With that said, I do anticipate some bullishness over this week back into the 450s. Somewhere in the 452-455 range would make sense. We've now pulled all the way back to the the 439-440 level I referenced on Mar 25, although not in the order I anticipated. However, I think this is a symptom of a bear market, as a healthy bull market would have completed that pullback prior to pushing into the 460s and onward.
So to sum up, I'm looking for some pretty substantial bullishness on Tuesday and Wednesday (possible gap up, some nonsense like CPI data as a 'catalyst') and a generally bullish remainder of the short trading week. Looking for a lower high, and selling to resume the following week. Will check back in end of week to see where things are.

Note

I think I'll start up a fresh idea soon, but figured end of month would be a good time to check in on this. And overall I'm pretty pleased with how this has gone. (And yes, I'm aware that making a direct correlation to 2008 does not necessarily make sense.) However, the price action has been remarkably similar.
As mentioned in previous updates, I got thrown off by how quickly we moved to test the gap in the 460s with almost no pullback. This actually biased me toward thinking there would be a second test, which is reflected in my earlier commentary. With the benefit of hindsight, we actually followed almost the exact trajectory I was expecting.
So with all that said, I'm anticipating a fresh low for next week and am swinging a short position with a target of 393-398. Not sure if we get quite that low but I'll be looking to scale out around 398.

stein3d

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