Hi all. This is my first post. I encourage comments and critique to enforce progressive learning for all.
I have been tracking the SP500 for quite some time now. The bullish sentiment is off the charts right now. Every forum I follow has some form of "Merry Christmas everyone, welcome to a continuation of the bull market! Buy more and go long!"
It boggles me that it is so. We have been in a long bull market, true.
You will see that in March of 2009, we had begun our new bull market. I am a strong believer in Elliott Wave analysis. And the same analysis has given me insight into what appears to be such an over saturated market that it just hurts to know of how artificial and fabricated the market is. We are on the tip of the iceburg, the peak of the mountain. We are in our last few breaths of air on the 5th Elliott wave.
I have entered a short position on the market as a result. The bullish sentiment is far too strong and far too good to be true for a continuation of the bull market. I would also like to emphasize that it is ALWAYS too good to be true before a market crashes. Remember how in 2000, bears were ridiculed for calling a top on the market? That crash was the 4th corrective wave of that bullish trend. The crash of Monday 1987 was the 2nd corrective wave. The housing crisis of 2007-2008 was the correction after the market had reached its peak in 2007 in its final 5th wave. I also would like to mention that the housing market was not the cause of the crash of the SP500.
Crazy right? Correlation is not causation. Every market follows its own trend. But that housing crash is what caused that 5th wave to not go up further as investor sentiment had dwindled...yet it allowed for the market to just reach the high of the previous 3rd wave.
Now, getting to the point. We are in an ending diagonal pattern on the SP500.
You can see that above the level of around 3174 was a point of market hesitation. The market had tried to correct and it had tested the upper wedge several times. I had foreseen this. Now we have broken through that upper wedge and are in the dangerous territory of hyper bullishness. Ladies and gentlemen, we are in the area where throw-overs occur.
A throw-over occurs when a market simply does not want to correct. It is fed so full of lies. That Phase 1 deal? BOGUS. It will not do anything to save the market. People are people, sheep are sheep- they follow patterns. Condition a flock of sheep to only move to the next pasture through a gate. Next, remove the gate separating the fields. Those sheep will follow one another through the gate regardless of the lack of gate. That is the reality of markets.
So when a market correction happens and it will (I bet Warren Buffet is biting his nails now too), it will be strong. It will be ugly. And it will be volatile. Take a peep at the VIX and you will see what looks to be makings of a strong trend up...slowly brewing. That, combined, with this throw over will lead to be a FAT dump if my speculation is correct.
Perhaps Buffet will hold his shares. I strongly believe that man will live to 1000 years old and will only sell his shares then when he intends to form the first galactic empire with his profits. But the rest of us mortals should be scared.
Happy trading!
PS I know that the RSI and MACD divergence lines are not drawn correctly on my chart. They respectively both begin at the 3rd wave peak of the 3rd impulse wave on the 25th of January 2018 and are connected to the peaks of the RSI and MACD of today.
Trade active
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Don't believe it? Look at how the SP500 has been making new highs almost everyday for the past 2 weeks. Let us see if post boxing day will sow what many have reaped.
Trade active
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In a leading or ending diagonal, IMPULSE AND CORRECTIVE waves follow a zig zag pattern. I repeat, zig-zag pattern. Every fractal wave in a diagonal will follow an ABC form. How do I know that we are indeed in a diagonal pattern? Well, take a look at the 4th corrective wave. A basic rule of Elliott is that the 4th wave cannot intersect into the boundary of the 1st wave, which our SP500 is doing. Also, I see the ABC waves rather clearly. Zoom into lower timeframes and you will see ABC patterns and WXY patterns. Furthermore, the 3rd wave here is rather short. It cannot be the shortest as a rule. The fib retracement and extension values do not match the typical 12345 structure either. Conclusion: diagonal, with sub structured ABC waves in both the impulse and corrective movements.
Trade active
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Another addition to my previous update: in an ending diagonal, a very obvious exclusion to Elliott's fundamental rules is that the 4th wave can enter the territory of the 1st wave. If you are in doubt, I encourage you all to read up on Elliott wave theory. Nobody is a master of trading- if we were, we would have zero need to read articles on trading view. Myself included. Upward and onward!
Great TA. How's that position working out for you now? :-)
Brizzy64
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@espenespen, I discovered a beautiful little tool that longs the VIX called "TVIX". That little beauty gave a nice 2000% return. To think everyone thought 4000 was the next level...sorry for the longs.
KirinAnalysis
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My view on SPX
KirinAnalysis
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It's completing the third subwave on a different cycle
@bryengineer95, wave should end around the 1.618 fib extension of the wave 1, I'll update on wave 4 once it's done
supere
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Thank you. What kind of top are you expecting and what is your downside target? I also see nothing impulsive about the overall structure since Dec 2018 lows. Only the rally since Oct had an impulsive look and it should likely be the Grand finale imho.
Brizzy64
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@supere, to find the top or bottom of any trend is like trying to catch a falling knife. I work on scoping out price action to be alerted to any reversals. Today's large dip for example was something I believe is the beginning of a "top". Once again, this structure we are in is an ending diagonal. Look closely to the wedge that it forms. You will not see anything related to the standard 12345 impulse structure in an ending diagonal. The only 12345 structures that I see in the SP500 are a) the overall bull trend from 2009 up until now b) the extended 3rd wave that ended last year 2018 and had begun in 2010.
Brizzy64
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@supere, I do agree with the "Grand Finale" stipulation. Happy trading (shorting)!
Brizzy64
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@supere, also, my first downside target is at minimum last December's low. However, as I believe we have reached such a level of saturation, I believe we will continue even further past that with a maximum retracement level of 50% of our total impulse, from 2009 up till now.