As bubbly as the dot com bubble was at the turn of the millenium, it never achieved a monthly close above the 1x1 45 degree Gann line of resistance.
Two wks into February, here we are... A rally into the close on a Friday to tap that 1x1 45 degree line... The last time that happened? Jan 26th 2018... coincidentally also a Friday, also a rally into the close.
Overlaying the dotcom bubble rally onto the current rally, the periods of volatility occur at roughly the same intervals. Given that I think we're about to get a iv and v to complete wave 3, then a 4, then a i and ii to start 5... we should stay rangebound between 3500 and 3070 for awhile.
Also note the smaller Gann Box and how the index reacted at the 1x1 line and the 0.75 price/date intersection. We are now at that same confluence in the larger Gann Box. Considering how the index reacted last time we touched the 1x1 line, I'm expecting a period of volatility to kick off here shortly. There's very little room left in February to move up.
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In addition to hitting the 1x1, we're also looking at a possible AB=CD measured move here around 3400. Again want to reiterate that I think the virus is a snake in the grass and that China is fudging numbers...
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Zooming we can see that the index is tracing the May/July 2018 fractal very closely. I'm expecting 3300 before February is over and we will at a minimum draw a running flat here within the next 2-3 weeks.
The whole optimism behind the virus tapering off reeks of a bull trap. One has to wonder why the new infection numbers show so little variance from one day to the next... the obvious answer IMO is that they are at capacity in terms of health workers, testing equipment, and time. In addition, the new testing standard that showed 10x the number of infections were only used for Hubei province... imagine what that number is gonna to look like when they enact those new diagnostic standards for the entire country.
With 25k more medical workers and new ad-hoc facilities built in the past wk, expect more tests and consequently more confirmed infections. The US has also expanded its testing to all patients exhibiting fly symptoms in major cities... expect confirmed cases stateside to rise in the coming weeks as well.
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Tin foil hat time... For a microcosm of how virus reporting numbers can skew perception, one need only look at the recently events aboard the Diamond Princess cruise ship.
On Feb 4, the ship was officially quarantined with 10 confirmed cases of the virus onboard. By the 6th there were an additional 31 cases, By the 9th an additional 66 cases, on the 11th 39 new cases, on the 15th 67 new cases and today 70 new cases.
At first glance one would conclude "ok, so the virus is spreading on a linear curve but doesn't seem to be blowing up like crazy"... but the overlooked fact that is that up until now, only 1,219 of the 3,700 onboard have been tested. That's roughly only 100 ppl tested per day which severely caps your sample rate. The reality is nobody knows how many ppl were already infected when they started the tests, and until everybody's been tested it's silly to even venture a guess at the rate of propagation based on incomplete results.
Newly confirmed cases/day in Hubei province has also been hovering around the same rate at +1k/day... even dropping a bit lately. But like the cruise ship, my guess is this steady number is limited by how many tests they can conduct on a given day.... and in a macabre twist, the drop in confirmed cases is more likely due to a drop in the # of tests given/day now that 1,700 health workers are infected and more than half a dozen have died.
If you extrapolate the results from the cruise ship of 1,219 tests returning 355 positive, that's about 1 in 3. So given the 70k or so confirmed cases, it's reasonable to assume that Hubei has conducted about 233k tests so far.
Therein lies the problem... Hubei province has about 58.8 million people. So up until now only 0.4% of the population has been tested. And this is assuming an infection rate in quarantined conditions. China has been reluctant to divulge numbers on just how many tests are given and it's easy to see why. The sample rate not only caps the number of new confirmed cases, it also caps the number of deaths attributed to the virus since only ones from confirmed cases count.
Wall street isn't dumb. If I can see this cognitive dissonance then surely they do as well. Some have postulated that the virus is NBD and China will return to economic normalcy by April... I think that's kind of ludicrous to assume at this point. I'm expecting a serious risk off move by the end of the month... something like 3400 -> 3300 in a week.
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There's blood in the water...
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Been awhile since we've seen an intraday dump like that... on seemingly no significant news either, which leads me to believe a negative catalyst is about to rear its ugly head. Hmmm what could it be...
I think the SPX has a date w/ the 13WMA soon... probably by the first wk of March. That's first target and see what happens from there.
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Took most of my profits here at the 1x8 support. Too choppy to make me believe that wave 2 might be a doozy I don't wanna be holding the bag when the short covering starts. Only taking a small short position into the wknd in case shit blows up. Expecting a bounce at the 50DMA either way so if it gets there, I'll scalp on the long side for a bit.
Also exited all GOLD positions for the time being as well... too overheated for me to keep holding there.
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Closed right at the old ATH w/ the 20DEMA flat so indicating lots of ambiguity and indecision. Been tracking the July top fractal nicely, but I'm not expecting the waterfall unless the virus news gets crazy bad over the weekend.
I mostly booked profits because 1) looks like we're due to draw some kind of right shoulder here and 2) Today's choppy action and chart looks more like a corrective ABC to me than an impulse, and we bounced at the 1.236 from yesterday's rally, which means we're likely in a flat and a C leg up is due.
Either way I think we'll see some kind of bounce at the .618 retrace area around 3300-3280 where the 50DMA (orange line) should provide support. There's bullish shark setup that will make for some good scalps. That may even be the end of the correction with this whole thing being a running flat though I doubt it.
If we get a daily close below the 50DMA, I can almost guarantee this correction will go sub 3200 before March ends.
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Booked profits on remaining shorts... kicking myself a bit for pussin' out too early Friday but steadily taking profits has saved me alotta cash on the way up as well.
My guess is the selloff isn't over but I still think this is a wave 4 correction of the larger rally so there isn't enough meat left on the bone for me to jeopardize juicy profits at this point.
Will reassess later in the wk but for now I've no interest in going long until sub 3200 or short until 3330.
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Gonna try and catch this knife here at the .382 retrace at 3190. Expecting it to go down to 3170-3150 but wth, it's all house $ at this point.
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As I've said before, the index favors technical movements toward the path of maximum ambiguity. Therefore I'm expecting a bounce around 3100. Until we get a daily close below 3100, this thing could still be the final wave of an expanded flat correction. Bullish shark also present which foretells of a face-ripping rally back to 3280+.
I know I've spoken at length about the market's underestmation of the virus, but let's also not underestimate the power of central banks and the perception that the US stock market is seen as the last bastion of safety for foreign investors... a safe haven investment if you will.
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50WMA here should be good for a healthy DCB at the minimum. Still waiting for that massive capitulation candle though... might not get it until a double bottom of some kind.
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LOL that is one ugly weekly candle... never in a million years did I think we would traverse the entirety of this channel in the span of a week. But I guess that's what happens with you've got bubble blowing central banks perpetuating this scam.
As was the 1x1 line at the top end strong resistance, so shall the 1x1 line at the bottom end become strong support. This is basically do or die time for the index as we come up into "value" territory. A weekly close outside of this channel would be crazy bearish and basically would indicate that the bull market is over.
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Zooming in we can see that there is a potential three drives setup forming here near the aforementioned support. Mu guess is futures will go tap it overnight, we gap up, selloff then recover.
So far I've been flipping everything mostly before the afternoon dump starts which has been working well, but we need to see some serious volume buying at a higher low to gain the conviction to hold overnight.
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As expected, it held support at the 1x1 Gann line off the 2019 bottoms and once we got that volume surge at the higher low, it rocketed off a short covering rally at the close. Despite the wknd being full bear right now I doubt the index will simply burn through Friday's low (maybe a lower low at the 1.236 extension at worst). But looking at the 2018 selloff you can see symmetry in price action will likely dictate some kind of flag being drawn here in the next month. I expect it to peep at least about the 200DMA in the next wk where it's a definite sell. No way we get above 3200 unless the Fed starts taking action or a vaccine is found.
Thank you once again for teaching me how to use the overlay. Check out my ES1! plot from yesterday (2/18). Used it to perfection, hit the pay button.
You rock dude.
chinawildman
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@hungry_hippo, You're welcome bud... btw overlay the topping pattern from july 2019 onto the current price action... lock step right now.
hungry_hippo
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Indices and futures oversold on the daily, so we may get a bounce here for a couple of days. Don't think the tank is over though.
hungry_hippo
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This correction is shaped just like the Feb 2018 correction, I'm hoping for a big gap down tomorrow, just like 2018, then go long for a day.
In other words..... I agree with your assessment and 3100 price level.
chinawildman
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@hungry_hippo, Yea and like Feb 2018 it wouldn't surprise me to see it go tap 3100 overnight and open right around where we are right now.
hungry_hippo
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@chinawildman, or even lower... I'm hoping for a big gap down which would make the decision much easier, especially if futures reverse in the morning.
chinawildman
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@hungry_hippo, Yup, let's see if we get that volume spike. Despite the massive price movement, volume really has been unremarkable in this selloff.
hungry_hippo
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Futures went oversold this afternoon, so I expect a bounce either Monday or Tuesday.
There's a chance of a big gap down Monday in which case it's an easy buy decision.
chinawildman
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@hungry_hippo, Yup agreed, the possible gap down is why I still held onto a few puts and VIX calls. But yea a bounce from 3300 w/ that shark there should take it back up to 3350 and the 20DEMA to draw a handle or right shoulder
LotusTrading20
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Hello,
very good chart.
what is the CC indicator shown below the chart?
You rock dude.