I believe that BTC is about to complete wave 4 (Mid Term chart) with a diagonal in the area of 17500 +/- 300. If it powerfully bounces off that area with a motive wave, this would be the first confirmation of going towards 22-23k in the next few months. If it breaks through the channel line, well, the rally could be over. From the previous update: “I have two sets of long term counts, red and green, red – primary (time will tell in about 6 months). Whether the current wave is C or III, I view that it is not done yet and would end in the area of 21600-24300 in February-March.”
This week the ES and other indices at the close indicated that they are probably not taking a direct path to the lower lows in order to complete the pullback. They closed rather indecisively, hinting that they would not mind taking a bear path and postponing the decision to the next week. Let’s explore the hypothesis from various angles.
CANDLES: (SPX Candles chart and Candles-Weekly-All) Monthly November SPX candle canceled any bearish mood in September and October. There are three weeks to go and anything could happen.
Weekly NQ: The most concerning one is obviously NQ. The futures, despite the mighty effort in the closing hours, closed 40 points below the middle line of the previous week candle, producing a clean Dark Cloud Cover candle. The last time this candle appeared in NQ on the weekly time frame was in February 2020. There were only other few occurrences in the past and most of them led to sizeable pullbacks. Also note the fractals in candles (they also exist) – 5 weeks prior to February crash and 5 last weeks now. The Dark Cloud is considered the second by its might after the Bearish Engulfing. I don’t know what happens next week, I am just pointing at the signs. DJ, SPX (both cash and futures), and NDX completed Bearish Harami combos. While they all require confirmation next week, the odds are on the bears’ side. SmallCap completed the Spinning Top, however, it would be more bearish if the green body was smaller. Again – indecision that requires confirmation.
Daily Daily SPX resembles a Bullish Hammer. Potential reversal, but the odds would be much higher if the candle closed above 8 EMA. While I expect somewhat higher prices next week, the 3670 area would be a major battleground for the next week.
TA: I can see many technical indicators starting to deteriorate. In the last few days, DJI, NDX and ES had their daily PSAR to flip on the dark side. We will see if SmallCap and SPX join them next week. I am getting cautiously bearish based on these signs.
MUSINGS: Based on the aforementioned, I am expecting a lot of whipsaw moves during the next week. The first wave A as marked on Short Term chart seems complete and it looks like there was no clear wave C that would wrap up this pullback. If this is correct, I would expect a wave B longer than wave A and a potential attempt to complete the whole pullback by wave C. If there is no clear motive wave C printed again, the pain can continue further (“…take your time, make it slow…” – ABBA). I made an attempt to project a possible path for the next week, so treat it as an attempt.
On my Long Term chart, I made minor changes. The price is floating at the level that would make wave 5 equal wave 1 in the red count. We are there now. Would it go further up or reverse? I hope to get some answers next week. The next week will help to determine whether the top is indeed behind and the possible duration of a pullback. I am cautiously bearish, watching for confirmation of this week candles.
To wrap it up on a positive note, I want to share a joke I heard few years ago from a guy who worked at Environment Canada. When you are in the woods you may meet a bear. In order to protect yourself, it is advised that you wear some small bells and carry a bear spray. You must carefully observe surroundings and watch for the signs of bears. Bear excrement is one of these signs, and it is also important to distinguish a grizzly bear scat from a black bear one. The grizzly’s usually smells like a pepper spray and contains the small bells.
If SPX closes today one pip below 3634.18, it would satisfy minimal requirements for weekly! Bearish Inside Out, a combo similar to Bearish Engulfing with the same odds. DJ and NQ show signs of healthy continuation. ES just flipped daily PSAR to the dark side, expect SPX to follow the suit by the end of day. SmallCap is building some sort of Bearish Sandwich, perhaps the picture will be clearer after the close.
Today is December 9 and I believe that today the SmallCap stock hit a very major Fibonacci level 3.0 if measured off the low in 2002. To be precise, the 3.0 level is 1936.39 (the green fibs on the Primary chart) and the stock hit 1936.80 and reversed. At the same time, the stock bounced off the upper boundary of an 18-year long channel. I view that these two events would define the stock’s path for the next several months and possibly years.
Certain observations hinted me to re-examine the waves that index made in the last two years. I am almost certain that the wave that supposedly completed today has been a corrective wave (marked B on the primary count). The main reasons are the counts, the fibs, and the character and the look, supported by some TA and candles. After looking into the wave that ended on February 2020 (marked A on primary), I was not that certain. It has qualities of both motive and corrective waves and I outlined the primary and alternative counts based on two possible assumptions for this wave.
Primary Count: 1. Main hypotheses: – wave (c) of A – motive; – wave B – corrective; – wave C is about to start or has started already. 2. The targets for wave C of 4 can be projected based on the length of wave A, marked by the red fibs/rectangle on the Primary chart. – minimal 1457, which is 0.618 of A (running flat); – normal 1326-1160, 0.786-1.0 of A (regular flat); – stretch 948, 1.272 of A (expanded flat). 3. Another way to project the targets for wave 4 – retrace 0.236-0.382 of wave 3. In this case wave 4 could end at 1411-1207, as marked by the purple fibs/rectangle on the chart. 4. One more projection can be done by the support at wave (iv) of a lesser degree – 1296-943, as marked by the green fibs/rectangle. 5. The end of wave C can also be projected by Golden Section – either 1320 or 940, the yellow fibs. 6. The long-term counts would be invalid if the wave falls below 856.48, but I think this is very extreme and would not happen. 7. Note: in this count wave B would be less complex than wave A. This type of alternation in the corrective waves is rarer than the other way around. I think that the most probable level for this count would be a retrace in a motive fashion to 1320-1330. If the retrace is not motive, this would hint that either an alternative count is taking place or wave B will be expanding further.
Alternative Counts: Main hypotheses: – wave marked B-C (red) is corrective, making it 4 consecutive major waves corrective – the whole correction is a triangle.
Alternative 1 – expanding triangle, marked by red lines/counts. Target for wave E – 940, support at the bottom of wave (iv) of lesser degree and by Golden Section.
Alternative 2 – contracting triangle, marked by blue lines/counts. Target for wave C – 1321, support at the top of wave (iv) of lesser degree, and by the channel line and/or Golden Section. If the current retrace evolves in a corrective fashion, I would be viewing the expanding triangle as more probable at this point. This expectation could change once the lengths of first completed waves are known.
The Last 2 Years chart provides a very detailed view on the waves that the index made since the beginning of the correction. The counts are greatly supported by the fibs and ratios between the waves. The wave off the March 2020 low breaks nicely into a zigzag, followed by a flat, followed by a motive wave that is possibly a diagonal as the width of the channel narrows. This is a text book example that is well supported by multiple fibs and ratios.
In summary,in the next several months (possibly weeks) I am expecting a sizeable decline with a minimum target in the area of 1450-1420.
1. If SPX closes below 3678.83, it will produce a complete Bearish Engulfing, the strongest of the bearish reversal candles that normally does not require confirmation. 70-80% chance of the reversal. 2. If NDX cash closes below 12504.97, it would do the same as SPX. 3. Target for DJI – 29972.07 4. SmallCap would complete the Engulfing if closed below 1881.70