We find SPY near the termination of a minor fifth subwave v of Intermediate wave (3), which in turn is part of a larger primary wave One. Primary Wave One should terminate near SPY ETF price 219 on/about 31 Dec 18, after a 28-day decline from 3 Dec wave origin.
Chart describes constituent components of Primary Wave One, including a i-ii-iii-iv-v minor negative impulse wave terminating in an A-B-C flat correction, and the subsequent steep decline to the "Christmas Crash" on 24 Dec, consisting of (so far) a wave 1-2-3- incomplete impulse.
It seems likely that minor wave v of Intermediate (3) has terminated at Monday 24 Dec prices, given Fib extension of wave iii in price and time after four down days; however, a real possibility of a v wave Extension Path exists, shown as Alternate Path in chart. Given weak price action, panic-level selling could drive price to 226.5 before a 4th wave bounce. Intermediate Wave (5) target is 219.5, possible extension shown could drive prices as low as 211.5 or less.
NB: Minor wave iii dropped ETF 10 pips, minor v has taken 7 more. Third waves are never the shortest waves. Selling waves typically last 3-5 days. Should get a turn on either 26 or 27 Dec for a likely 0.382 Fib retracement. A higher lift is possible but unlikely, given EW alternating wave theory, we already had a strong lift in 2nd reaction wave with a 0.50 Fibo retrace (noted on chart), ergo, expect this 4th wave will be relatively weak. A more robust Retracement Bear Rally of the entire December impulse would be expected after the completion of the (5) Intermediate Wave in December's bearish impulse, target shown in blue box as a rough possible estimate of ~ 254 - 265. Following that countertrend Secondary Rally, expect a powerful and severe Secondary Bearish Reaction with another 5-wave Impulse down to price levels reaching back to 2016, or even lower, should Panic and Despair prevail.
Longer-term, I expect only more Bearishness. In 2008, NAS lost 80%, Dow lost 45% and SPX went off over half. This one will be worse. After 86 years since the Crash ended in August 1932, prices reached astronomical new highs in September 2018. There is a distinct possibility that this represents the culmination of a Grand Elliott Wave Supercycle, postulating Grand Wave V completed on 3 Sep 2018; if so, the Great Bear may finally be coming out of hibernation. Of course, this is speculative theory and remains unproved, nonetheless, it is a fascinating concept: en.wikipedia.org/wiki/Grand_supercycle
As always, these posts are purely informative ideas, and do not constitute investment advice. GLTA!
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What a wonderful trading day- we had no less than three textbook formations: early in session a perfectly balanced inverted H&S led to a failed rally, rejected at resistance of opening price level. That became part of a cup & handle with a bearish 'bull flag' handle sloping down until early afternoon, when the breakdown of B wave led to exactly stop at 0.62 Fibo (LOL Dow -620 off 1K, what a perfect FIBO!) from which the reversal of much-anticipated C wave carried index to complete the zig-zag countertrend correction. Make no mistake, the primary trend is still DOWN!
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Overnite futures high for Sand P of 2517 suggests pivot might occur at 0.618 Fibo price for SPY of 249.5. Trading premarket at 249.33...
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In first hour of Friday trading we got the double tooth top formation in opening, then lower. Buying puts on SPY- GLTA!
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+10% on puts in first hour and index respecting the Fibo 0.618 level; rejected!
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Monster short covering rally late PM respected the 0.618 Fibo in body of candle (wick popped above it for a moment); tentatively calling wave 4 complete but expect one more try at a rally to form a right shoulder, probably Monday morning for a short entry.
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On a right shoulder in H&S on MOnday PM buying puts- Jan 245 SPY put. GLTA!
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Added to position pushback from 250 is strong will soon pivot, Fibo time running out on this rally, may break as soon as 1-02 or 1-03 after a week in countertrend.
Expecting a down day Monday since it's the last day of the year. I'm also expecting funds to buy to start the New Year, which would form your right shoulder. Id Monday is a down day, I'm dumping half my puts in the morning, the rest before the 2 pm pump we've been getting. I expect FAANG stocks to sell off the most, bought AAPL, NFLX, and FB puts after I got home from hunting. I expect FB to drop regardless, unless there a huge rally.
DaddySawbucks
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@hungry_hippo, The 2pm pumps are caused by short covering. They have no endurance. Monday could be another rally to cover shorts for EOY closing positions. Tax selling typically prevalent in early Jan, defer taxes to 2020, this could be catalyst for the final down move before monster rally. Expect more wild swings!
@not-abot, Thanks for the link! EW model projects a double bottom before the real face-ripping rally, probably rocket to 0.786 Fibo. Compare with 1987 price behavior before the -20% crash, it did exactly this- a double-double top, with a huge bear flag between tops; a sharp correction with a double bottom, and monster rally until September '87 preceding a even greater monster Black Swan Dive. 1987 economy was not really weak, just slowing of growth (expected and forecast to <2% for 2019), coupled with terrifically high prices, discounting future earnings for 40 years. Prices just got too high- again.
not-abot
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@DaddySawbucks, WOW, I mean WOW, its so eerily similar to the present(with respect the fact that we had real 'organic' GDP back in 1987). EW dictates that we will not see it play out the same way 'exactly' but given the setup, it should play out very much alike. We should see longer drawn out frequency and subdued amplitude relative to the 1987 drama because our economy is 'inorganic' relative to the 1987 economy.
Yep, found an old 2012 article that shows exactly what you are talking about:
If the 4th wave does terminate(shoulder over) early next week, the 5th wave should not exceed the length of the 3rd which sets us up for a big correction(massive bear rally).
DaddySawbucks
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So gratifying to see the market fill in my charts, even if it came in a bit over estimates! Fib time running out on the ABC rally, anticipate entry on first short positions Friday.
gvoommen
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You are a very smart guy. Your technical analysis is very strong. Continue the awesome work.
DaddySawbucks
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@gvoommen, Thanks. TBVH, I often still lose money even though I anticipate the moves correctly, either my entry is poor or I get squeezed out by subminuette fluctuations. Still learning! tyvm for kind comment, GLTA!
hungry_hippo
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Yeah, I'm expecting a bounce as well, with a Friday afternoon sell off and heavy selling pressure on the last trading day of the calendar year. I want it to be a huge bounce so I can buy puts on Friday.
DaddySawbucks
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@hungry_hippo, Looking at futures now you might need puts Wednesday lol it's a mistake to imagine we can easily predict what the beast will do. Very unstable now. Agree it will likely be rough on Friday and the short session on Monday before holiday will likely be scary bad, as 24th was. GLTA