This is not financial advice and you should do your own research before making any life changing decisions.
I'm going to keep this short and sweet. It's quite obvious that the stock market is completely exhausted. We've gone through a whole week of massive selling and while Friday just started things look like we're going to have a bounce. There's potential for a small rally up to about 2600 by the end of the year, but I fully expect that level to hold as major resistance.
It's hard for somebody holding stocks to sell at a loss but the data here doesn't lie and I'm trying to show it as simple as possible. We got a higher high from the high point at Jan 26 2018 vs Sep 21 2018. It's hard to see it with the indicators at the bottom of my chart but on higher timeframes (1 week), there was significant bearish divergence.
My overall target for the S&P is going to be somewhere in the neighborhood of 2250 which would shave another 10% off of this index. I don't have a timeframe for this but there's high probability this will happen in 2019.
Now ... what does that mean for YOU?
If you hold stocks, they'll likely suffer.
If you have a 401k that uses blended techniques, chances are some of those holdings are in stocks, too.
I am not recommending anything but you might want to look into bonds as a safe haven temporarily.
I'm going to keep this short and sweet. It's quite obvious that the stock market is completely exhausted. We've gone through a whole week of massive selling and while Friday just started things look like we're going to have a bounce. There's potential for a small rally up to about 2600 by the end of the year, but I fully expect that level to hold as major resistance.
It's hard for somebody holding stocks to sell at a loss but the data here doesn't lie and I'm trying to show it as simple as possible. We got a higher high from the high point at Jan 26 2018 vs Sep 21 2018. It's hard to see it with the indicators at the bottom of my chart but on higher timeframes (1 week), there was significant bearish divergence.
My overall target for the S&P is going to be somewhere in the neighborhood of 2250 which would shave another 10% off of this index. I don't have a timeframe for this but there's high probability this will happen in 2019.
Now ... what does that mean for YOU?
If you hold stocks, they'll likely suffer.
If you have a 401k that uses blended techniques, chances are some of those holdings are in stocks, too.
I am not recommending anything but you might want to look into bonds as a safe haven temporarily.
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A good friend of mine once said to buy when others are fearful and sell when others are greedy.
Amazon hit $2000 and major media outlets were praising the bull market. News headlines were screaming for joy! "BUY BUY BUY!" they said. Of course that's when things turned to the downside. It's textbook contrarian theory and it doesn't always work, but it does most of the time.
Now we're sitting in a place where everybody is screaming "BEAR MARKET! BE AFRAID!".... This is actually a lucrative area for investors to try and find a pivot. Find some bullish divergence. Get some solid companies to stand behind and put some money in.
THIS IS NOT ADVICE TO BUY ANYTHING TODAY. In fact, I don't recommend to buy anything today. Absolutely not. You're literally trying to catch a falling knife. While I do believe there will be a bounce here (and potentially a signifiant one), this market is far from done. Don't get caught in a fakeout and don't invest in unstable companies.
Here's an updated bear roadmap which would include the hypothetical bounce I am expecting:
Amazon hit $2000 and major media outlets were praising the bull market. News headlines were screaming for joy! "BUY BUY BUY!" they said. Of course that's when things turned to the downside. It's textbook contrarian theory and it doesn't always work, but it does most of the time.
Now we're sitting in a place where everybody is screaming "BEAR MARKET! BE AFRAID!".... This is actually a lucrative area for investors to try and find a pivot. Find some bullish divergence. Get some solid companies to stand behind and put some money in.
THIS IS NOT ADVICE TO BUY ANYTHING TODAY. In fact, I don't recommend to buy anything today. Absolutely not. You're literally trying to catch a falling knife. While I do believe there will be a bounce here (and potentially a signifiant one), this market is far from done. Don't get caught in a fakeout and don't invest in unstable companies.
Here's an updated bear roadmap which would include the hypothetical bounce I am expecting:
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Significant Bounce confirmed! Still not advising retail investors hop in the stock market just yet. This capitulation spring went very very deep... further than I expected for this wave.
No Trump, this is not a "glitch". This is the confirmation stage of a bear market. We got the divergence to enter the bear market back in roughly September when we had the higher high followed by a massive sell off, then chop chop chop and capitulation. We have sprung but not to an area that I would say "yeah this is a glitch, people really didn't mean to sell millions of shares of xyz stock all at once". Apologies, this was not meant to be political at all.
Anyway, wave 3 completion is still intact as long as we don't rise much more than we have so far. Wave 3 was 161.8% the length of the first wave which is a bit concerning as it took us pretty deep but the retrace back to begin the 5th wave of the larger 3 should be complete and we should work our way down to our golden area where another bounce should be felt... again, pretty hard.
For your consideration.
No Trump, this is not a "glitch". This is the confirmation stage of a bear market. We got the divergence to enter the bear market back in roughly September when we had the higher high followed by a massive sell off, then chop chop chop and capitulation. We have sprung but not to an area that I would say "yeah this is a glitch, people really didn't mean to sell millions of shares of xyz stock all at once". Apologies, this was not meant to be political at all.
Anyway, wave 3 completion is still intact as long as we don't rise much more than we have so far. Wave 3 was 161.8% the length of the first wave which is a bit concerning as it took us pretty deep but the retrace back to begin the 5th wave of the larger 3 should be complete and we should work our way down to our golden area where another bounce should be felt... again, pretty hard.
For your consideration.
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Perfection! I suppose the retrace was a glitch, too. Automatic Rally baby!
This is not a market for retail investors. This is a professional market right now. Don't try and catch the bottom. Probability shows we're heading for the golden zone in wave 3, back for another retrace of a larger wave 4 (to be determined when 3 is complete) and then the final kill on wave 5!
This is not a market for retail investors. This is a professional market right now. Don't try and catch the bottom. Probability shows we're heading for the golden zone in wave 3, back for another retrace of a larger wave 4 (to be determined when 3 is complete) and then the final kill on wave 5!
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It's been a couple days since I've done an update so I thought I'd give a different perspective this time. This time let's look at prior retracements from swing high to swing low.
First trading zone: 2942 > 2605 > 2815
Fib levels don't lie and machines automatically trade at these levels like clockwork most of the time. Probability is important here, not perfection. These levels can be wrong but playing on the right side of the trade and you can't lose money. We retraced almost exactly 61.8% from swing high to swing low before getting rejected.
Second trading zone: 2942 > 2346 > ??
We're also drawing fib lines here to try and predict the LARGER rejection at the either 50% or the 61.8%. I don't expect the 61.8% to hit this time around due to the Third trading zone that I will outline shortly. I expect rejection at or around the 50 putting us capped around 2650
Third trading zone: 2800 > 2346 > ??
Here's the money maker. From our major rejection at 2800 down to our selloff that hit 2350ish. We are about to hit the 50% on this retrace which coincidentally is PERFECTLY matched up to the 38.2 retrace on the larger swing high/low outlined in the second trading zone. Good confluence there. Almost too good. Assuming we can break through that zone, I expect massive rejection at or around 2625 to 2650 which is also outlined in the second trading zone. This is the 61.8% retrace in zone 3.
Ok, so I am saying it's getting rejected soon. If that happens, what is next you may ask yourself?
Where it goes after that is anybodys guess in the short term. I won't make any doomsday predictions at this time until it's confirmed that we do get rejected in the 2625-2650 zone. Until then it's continuing upward.... then the large overhead resistance will start to kick in. I'm highly doubtful any recovery is imminent.
First trading zone: 2942 > 2605 > 2815
Fib levels don't lie and machines automatically trade at these levels like clockwork most of the time. Probability is important here, not perfection. These levels can be wrong but playing on the right side of the trade and you can't lose money. We retraced almost exactly 61.8% from swing high to swing low before getting rejected.
Second trading zone: 2942 > 2346 > ??
We're also drawing fib lines here to try and predict the LARGER rejection at the either 50% or the 61.8%. I don't expect the 61.8% to hit this time around due to the Third trading zone that I will outline shortly. I expect rejection at or around the 50 putting us capped around 2650
Third trading zone: 2800 > 2346 > ??
Here's the money maker. From our major rejection at 2800 down to our selloff that hit 2350ish. We are about to hit the 50% on this retrace which coincidentally is PERFECTLY matched up to the 38.2 retrace on the larger swing high/low outlined in the second trading zone. Good confluence there. Almost too good. Assuming we can break through that zone, I expect massive rejection at or around 2625 to 2650 which is also outlined in the second trading zone. This is the 61.8% retrace in zone 3.
Ok, so I am saying it's getting rejected soon. If that happens, what is next you may ask yourself?
Where it goes after that is anybodys guess in the short term. I won't make any doomsday predictions at this time until it's confirmed that we do get rejected in the 2625-2650 zone. Until then it's continuing upward.... then the large overhead resistance will start to kick in. I'm highly doubtful any recovery is imminent.
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Nothing has really changed so far this week. I'm still holding my positions and will be looking for puts soon.
Yesterday looked like it would start red but it ended up closing green. The speech from Trump doesn't appear to have affected the market but then again the stock market is heavily driven by algos, so I'm not surprised we're still rallying. I've added a new measurement to the chart to further illustrate my rejection zone:
Yesterday looked like it would start red but it ended up closing green. The speech from Trump doesn't appear to have affected the market but then again the stock market is heavily driven by algos, so I'm not surprised we're still rallying. I've added a new measurement to the chart to further illustrate my rejection zone:
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SPX hasn't been very active the last few days, but as an update, here's a chart with the outlook. The fact that this week is going to be an earnings reporting week leads me to believe we're going to see some volatility likely later in the week.
So far the plan is unchanged.
So far the plan is unchanged.