Today’s historically large intraday reversal could indicate that Minor wave 3 is actually still tracing out. Minor 3 would = 1.618 x price move of Minor 1 @ 4,746 SPX. This means that today’s peak was Minute [iv] of Minor 3 down. This actually looks good as a wave structure.
Of course there are other short term counts to consider. The market may be range bound for a while created by the violent bounce in Monday’s trading. Thus, we are in some kind of complex sideways Minor 4 corrective. The count should resolve itself. If we are still in Minor 3 down, I would expect a lower low to occur fairly quicky.
Up to date CPCE. Starting to move.
Of course, the real market killer corporate killer is the short-term 3- and 6-month T bill which determines where the Fed places the short-term rates. Barely budging despite the +50 VIX.
Very violent price action all day with a very elevated VIX. Today reminded me more of 2008 plunge and violent bounce post-Lehman more than it did 2020.
The primary count is that today’s price low was the Minor 3 low of a 5-wave structure down. This implies that a new price low MUST occur to validate this large 5 wave structure. Otherwise, so far only 3 large waves from peak have occurred. The only EW rule is that Minor 4 bounce cannot trace into Minor 2 corrective. Prices must remain below Minor 1 low and make a new low beneath Minor 3 to confirm that overall, 5 wave structure.
Here are a couple of looks:
The first supposes a major bounce to form a price hit on the proposed (1) channel line down. Prices would partially or almost wholly fill the large gap down.
The second look: Note how the bounce today hit the underside of the proposed “base” channel. This is a classic move of a wave 4 price peak in a 5-wave structure down. We are talking a multi-hundred SPX move both up and down in a matter of minutes. The violence of this market is rarely seen. Even in the midday “calm”, the 1-minute charts were moving 50-60 handles. But today seemed a short-term panic low. However again, there is a required lower low to form a proper 5 wave structure down.
So far Minor 3 has extended about 1.5 times the length of Minor 1. This is a nice ratio.
China also broke a bit. Note the overlap from the initial bounce low price peak. Which means the move up from the 321 low in early 2024 is a 3 wave move corrective.
Note how in 2020 bond yields plunged in the panic. Thats not happening – yet – so far. And that is far more damaging than anything else. Sticky high interest rates are already killing the economy. The consumer is tapped out.
Again, I don’t have today’s CPCE data, but the moving averages are starting to budge upwards. Its going to take a lot more price plunging to get these things moving higher.
And the very long averages have barely budged.
The SPX is still a long way from even the 2020 price peak. That was only 5 short years ago. I’m confident it will work its way there eventually.
Every other panic since 2000 results in lower short-term rates. In 2020, they quickly plunged to near zero. This time seems different because it is. The 40 year down channel for yields (see the 10- and 30-year charts above) has finished its pattern and a new pattern has emerged if anyone cared to notice.
Glorious waves. Best count is that the market is in wave [iii] of 3 down. A 90% down day in both declining shares and volume. I read somewhere today set an all-time record for total volume all markets combined.
Allow me to present the top alternate count first as that is the most interesting count for now. This count is interesting because the proposed wave [b] of 2 is practically fully developed. Therefore, we can quickly abandon this count if the market continues to immediately impulse lower thereby continuing to form Minor 3 down.
Today’s gap down was just ridiculously huge, and the market has a way of closing the gaps sooner rather than later particularly if the trend has truly changed to down. This is the best bear count overall that closes the gap. This would be a market-chasing massive shakeout. Squeezing the weak bears and making the nervous bulls chase. And then when the weak bears have sold and the BTFD’ers have exhausted at the peak of Minor 2, then all true hell breaks loose, and the market is frozen in fear. Minor 3 down commences. Interesting scenario so I present this first.
Of course, it’s easy to outsmart yourself. The straightforward bear count is what it is.
It looks good from 10,000 feet.
And from 100,000 feet.
The Composite nearly in a bear market after nearly peaking for the 3rd time in a row only 3 months ago. And that’s saying something. Making an all-time high in December, coming close again in January and again in February. It’s not like the market hadn’t been exerting a ton of effort. Exhaustion.
I don’t have today’s CPCE data, but really the market is still betting heavily to go up in the options market. Not a whole lot of panic out there despite the VIX closing finally over 30. When we see some of these moving averages climb nearer the panic line, then we can take note. It’ll take a continuing collapsing market for that to happen.
The [a]-[b]-[c] up to Minor 2 is practically a 1:1 ratio. A 3-wave pattern up which is corrective which implies the main trend has switched and is down.
Today wasn’t conclusive, but the price action leans toward a Minor 2 wave up in progress. So, the primary count would be thus:
The above is not the best-looking Elliott Wave structure, but it has a more impulsive look to it rather than corrective.
The top alternate is that prices must immediately fail come Monday and head to a lower low to prove out wave [iv] of 1 down had peaked. More sideways mess would indicate Minor 2 up as in the chart above. But it’s starting to not “look right” as an EW structure. Had prices ended today at a low-of-day, then this would have remained top count.
The SPX is at a crossroads. The primary count is wave [iv] of 1 down peaked today in a 3-wave pattern zigzag. This corrective wave contrasts with the proposed wave [ii] downward flat. Time-wise wave [iv] should have ended today. The next wave [v] of 1 should be down to a lower low to Minor 1.
Any immediate higher prices complicates the count and probably indicates that Minor wave 2 is tracing out. This is what makes the pattern interesting.
The CPCE does not show any panic. Only bullishness. The majority of the equity options market is bullish on higher prices from here. It’s not necessarily a short-term predictive chart but it does display a still overall sense of complacency within the overall market in general.
The talking heads speak of a bit of panic in the air and perhaps that is coming true. But as the saying goes, don’t do what I say, do what I do (or don’t do). So, let’s look at the actual put/call ratio – CPCE – the put/call action – as of Friday’s close (I won’t have today’s close until tomorrow on Stockcharts).
Long term is way more complacent:
Shorter term shows zero days of panic as of yet. Nothing even close to the panic line on a daily basis. So don’t listen to the hype of the talking heads (blood in the water sells!). Look at what the actual money is saying. And that money still reflects an overall bullish sentiment rather than not.
3 charts that show a disparity in losses.
The NASDAQ has lost the most so far:
With the SPX almost touching “correction” territory (-10%) today. And by the way, this squiggle count is a best guess wave structure at the moment. Flawed? Does it look corrective down or more getting on with an impulsive look down? It doesn’t scream “3 waves” corrective so I tend to lean toward impulsive down.
The daily shows a drop beneath significant horizontal support. What this means is that everyone who bought the SPX since about Sep 2024 is in risk of losing money. So any gains from here cause people to bail to “get out”. That is the psychology of support/resistance.
Yet the overall drop from a log scale is really just a blip, isn’t it? This is reflective that there is really not yet any true long-term panic despite whatever talking head wants you to believe. Blood sells! Now that the “evil” Trump is President, the media wants failure of the markets.
And finally, the Dow Jones Industrials are still standing tall as can be. The loss from peak is a little bit more than half of the NASDAQ at this point. But I think that’s how it was in 2000….
The count is very good. This Elliott wave structure has many good things going for it:
(Red = Intermediate) Waves (1) to (5) and (2) to (4) perfectly connect on a very precise parallel channel trendline(s).
The subwaves are all there.
Wave (5) seemingly ends in an ending diagonal triangle (EDT).
The “proof” of the ending triangle is that prices collapsed to beyond the starting point of the EDT. That occurred today.
Corrective waves (2) and (4) alternate in form. Flat vs. zigzag. This is a good EW structure trait.
Peak RSI on the medium and long-term charts is where we expect it to be; at the subwave 3 of 3 or wave 3 in general with declining RSI strength as the wave structure advances to peak.
Prices bounced perfectly at the long term lower trendline. This could be the wave 1 down low. We shall see if a significant bounce occurs. It would be the logical spot.
Additionally, prices reached a significant horizontal support line. A logical bounce spot.
All in all, a very nice structure. And we are going with it!
Long term count:
Squiggle count seems OK.
Conclusion: The overall wave structure from a long term, medium term, and short term seems to indicate a long-term trend change. In the short term the structure supports a wave 2 bounce.
