Okay so this is a mess and I will break it down now.
First of all, I've long been arguing that the SPX is following a rising wegge which happens to intersect with a megaphone type shape.
This presents a trend of long-term lower-lows juxtaposed with long-term higher highs since roughly 2018.
The megaphone pattern itself is bearish, but the rising wedge shows further bearishness here.
One of the main things I have been looking for is violation of the megaphone shape. A break to the outside of it would be bullish no-doubt. However, less-obviously, a deviation away from the trend of higher-highs I would take as a key bearish signal and I believe we may have got that signal this week as you can see in the chart below.
This is important because it turns the megaphone shape into a potential de-facto downwards channel (albeit a very big one) and I consider could be the starting gun for a de facto bear market.
So, presuming the trend of lower-highs appear as I consider likely then this is how I imagine the market to unfold over Q4 and 2020.
Yes, seriously, this is a very simply outline so I will break it down further with some Fibonacci outlines and technical indicators.
First of all I add Fibonacci time cycles here to attempt to predict the overall movement of the markets
The plot above fits very well to the peaks and most important calls the last peak at the end of 2019 sometime in December.
As you can see this coincides roughly with where the wedge would end and seems straightforward enough but I actually believe other factors are at work here which complicates matters and we are going to see a rockier ride than a simple wedge break downwards.
If we add Fibb. retracement levels into this then juxtaposing them against the fibb. time zones gives us some more useful information.
- Firstly the current fib. time zone started in April and will not end until December. We can see from the current downmove that the 1st overhead fib level has been respected and as such I consider it likely that we will pretty much grind down the overhead resistance line until the wedge is broken to the downside in the 2nd half of October.
- A drop is necessary for the trend of the Fibb. time zones to continue because as you can see they imply a final peak occurring mid-december.
- The downward-moving overhead resistance trend by this time will be around 2925 and this creates another very important form on the charts.
As we can see this coincides roughly where the right-shoulder of a head and shoulders shape would sit.
- The 1 fib serves as head.
- The 0.786 fib serves as neckline.
- The right shoulder will be created by the downward moving overhead resistance trendline crossing over into the 1st fib. zone.
From here the downside possibilities are substantial but impossible to calculate precisely because long term support itself has also been moving downwards. A conservative first-bet seems to be the 2400 level as this coincides where base of the overall head-and-shoulders form originated.
Adding RSI then another factor we can take into account here is that RSI is on a downwards trend and we can consider it has been diverging from recent price performance.
Actually, I consider it has practically been following the downtrend of long-term support in-line with the lower bounds of the megaphone so far and as such I expect this downward trent to eventually be reflected in practice action.
Comment:
Goddamn I was tired when I wrote this, apologies for the typos. I'm gonna blame my stupid computer for the blatantly stupid autocorrections as well in all fairness to myself.