Like most, the 2008-09 financial crisis had an impact on me, my family, my financial decisions, and pretty much everything. It was a life altering time period.
Now, granted back then, I was a younger trader, and retirement was not on my radar screen. Fast forward 15 years into the future, and you bet, retirement is a blip on my radar screen now, and I’m paying attention.
When it comes to retirement funds, I witnessed first-hand during the financial crisis of 2008-09, how people who had worked their entire life, saw the fruits of their life’s labor, dwindle to a pittance of what it was the year prior. So that time period in the markets had an effect on my perspective as I’m sure most of you reading this.
2008, I concluded was much like the stories my granddad told me of living during the great depression, and how that event shaped every decision he made until his passing in 2018. Now, I’m not prone to being “Chicken Little” and run around and say the sky is falling…. But this pressure on my head from the sky is kind of concerning.
In my trading room, we held a training conference call this past Monday. I chose one attendee from the group to label a chart of price action. I told the attendees the chart they would be observing was a fictitious chart. This exercise is a function of helping novice Elliottitions come to an analytical thesis about the price pattern and structure their viewing. In this particular example, the attendee labeled a full pattern and stated a retrace of a certain magnitude was order. Now bear in mind, this is an exercise in structural observation and it takes a total of a five minutes to conclude. It is by no means a scientific conclusion. But to come to that conclusion in such a short period of time was worth discussing further. The pattern must be obvious for novice Elliottitions to form a conclusion in such short order. In truth, that exact chart used during the exercise was the SPX monthly cash market since inception. To the attendees it was labeled as the American Bottling Company, Inc., an obvious fictitious company. This was done to prevent the attendees from regurgitating the SPX analysis we discuss on daily basis. We discussed the exercise, and ultimately concluded that a retrace to the wave 4 of one lesser degree was in order from a minimum standpoint. I then, came clean and told the attendees they had just forecasted a 50% drop in the SPX. That forecasted low, in this very unscientific and quick observational analysis put the SPX cash index back to COVID-19 low of 2192.
Today, the SPX is at 4012.32. To get to 2192 would constitute a 45% haircut. I cannot stress this enough…that is the ideal retracement area. If you study Elliott Wave Theory, you’ll know that a wave 4 ideally retraces .382 of its wave 3 all the way up to .50%. If my analysis is correct, wave 3 started in the aftermath of the stock market crash of 1929 and concluded in January 2022. To retrace .382 of that price action is in the 2960 area and 50% of that retracement would equal 2300-2400. So the area at or slightly higher than the COVID-19 should get tagged.
Let’s discuss how we get there.
With respect to the impending downside, the first break in upside price action comes with a breach of 3901.75. A breach of that price changes the upside pattern we've been tracking since the October lows of 3502, into a new downside pattern. At that point in time 3788 comes into view. Depending on the structure this forecasted move down takes, I will be able to dial in short and potentially longer term targets. Support regions below that are 3590 and the October low of 3502. Any breach of 3590 brings the real possibility of 3300-2800 into view.
I conclude with I have shared this analytical thesis of mine with my followers on TradingView.com on several occasions. Am I urging everyone reading this to sell? I cannot, nor will I, provide such direction. It would be irresponsible of me to word my warning as such. Let’s just say, when it comes to market price action, we have no shortage of opinions. Feel free to consider or dismiss mine. Additionally, I am not trying to be purposefully ambiguous. Let’s just say, for this trader, I am looking at moving all retirement assets to cash equivalents for an intermediate period of time, if we can get into my gray target box.
Best to all,
Chris
Now, granted back then, I was a younger trader, and retirement was not on my radar screen. Fast forward 15 years into the future, and you bet, retirement is a blip on my radar screen now, and I’m paying attention.
When it comes to retirement funds, I witnessed first-hand during the financial crisis of 2008-09, how people who had worked their entire life, saw the fruits of their life’s labor, dwindle to a pittance of what it was the year prior. So that time period in the markets had an effect on my perspective as I’m sure most of you reading this.
2008, I concluded was much like the stories my granddad told me of living during the great depression, and how that event shaped every decision he made until his passing in 2018. Now, I’m not prone to being “Chicken Little” and run around and say the sky is falling…. But this pressure on my head from the sky is kind of concerning.
In my trading room, we held a training conference call this past Monday. I chose one attendee from the group to label a chart of price action. I told the attendees the chart they would be observing was a fictitious chart. This exercise is a function of helping novice Elliottitions come to an analytical thesis about the price pattern and structure their viewing. In this particular example, the attendee labeled a full pattern and stated a retrace of a certain magnitude was order. Now bear in mind, this is an exercise in structural observation and it takes a total of a five minutes to conclude. It is by no means a scientific conclusion. But to come to that conclusion in such a short period of time was worth discussing further. The pattern must be obvious for novice Elliottitions to form a conclusion in such short order. In truth, that exact chart used during the exercise was the SPX monthly cash market since inception. To the attendees it was labeled as the American Bottling Company, Inc., an obvious fictitious company. This was done to prevent the attendees from regurgitating the SPX analysis we discuss on daily basis. We discussed the exercise, and ultimately concluded that a retrace to the wave 4 of one lesser degree was in order from a minimum standpoint. I then, came clean and told the attendees they had just forecasted a 50% drop in the SPX. That forecasted low, in this very unscientific and quick observational analysis put the SPX cash index back to COVID-19 low of 2192.
Today, the SPX is at 4012.32. To get to 2192 would constitute a 45% haircut. I cannot stress this enough…that is the ideal retracement area. If you study Elliott Wave Theory, you’ll know that a wave 4 ideally retraces .382 of its wave 3 all the way up to .50%. If my analysis is correct, wave 3 started in the aftermath of the stock market crash of 1929 and concluded in January 2022. To retrace .382 of that price action is in the 2960 area and 50% of that retracement would equal 2300-2400. So the area at or slightly higher than the COVID-19 should get tagged.
Let’s discuss how we get there.
With respect to the impending downside, the first break in upside price action comes with a breach of 3901.75. A breach of that price changes the upside pattern we've been tracking since the October lows of 3502, into a new downside pattern. At that point in time 3788 comes into view. Depending on the structure this forecasted move down takes, I will be able to dial in short and potentially longer term targets. Support regions below that are 3590 and the October low of 3502. Any breach of 3590 brings the real possibility of 3300-2800 into view.
I conclude with I have shared this analytical thesis of mine with my followers on TradingView.com on several occasions. Am I urging everyone reading this to sell? I cannot, nor will I, provide such direction. It would be irresponsible of me to word my warning as such. Let’s just say, when it comes to market price action, we have no shortage of opinions. Feel free to consider or dismiss mine. Additionally, I am not trying to be purposefully ambiguous. Let’s just say, for this trader, I am looking at moving all retirement assets to cash equivalents for an intermediate period of time, if we can get into my gray target box.
Best to all,
Chris
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