SPX lost 4k on high inflation data; 5-3-5 ABC wave targets 3400?
As I have been warning many times since start of June, SPX again pulls another bulltrap. Many were expecting a bullflag to break above 4200 but what I actually see is a DIAMOND REVERSAL PATTERN which breaks below the psychological 4k support by gapping down to 3900. It stopped exactly at the base of the green Megaphone pattern of Sept 2021 to 4818 ATH. I think SPX may go up soon to fill the gap before doing the final leg of this ABC corrective wave. 3500/3400 is a good support with SPX retesting another green Megaphone pattern back from 2018.
A BIG MOVE is coming next Wednesday to Friday after another impt FED event. Last Friday, VIX was not able to reach 30 even with so much drop in the indices.
US dollar DXY & TNX 10-yr rate going higher. Money is rotating into safe haven like gold & dollars.
WATCH VIX carefully. If VIX reaches 30 before the event, there will be a shortterm rally. But if VIX remains low going into FED announcement, another capitulation will follow. There is a possibility the FED will be more hawkish by annoiuncing a 75 basis point rate hike in July or September. The FED needs to show it is serious in fighting inflation but many times it is just another FED rhetoric to condition the market & see how the market reacts.. Often times the bond vigilantes will do the job for the FED, without the need for aggressive hikes.
Small WAVE 5 prediction: ABC’s wave C is near completion & currently doing the final wave 5 of C. This small wave 5 will be 5 waves. Friday’s breakdown of 4k from the diamond reversal will be the first wave of 5 (1/5). Wave 2/5 will be the counter trend relief rally to fill the down gap. Wave 3/5 will be the big capitulation needed to push VIX above 30. Then Wave 4/5 & 5/5 may be the lower low to create a DIVERGENCE to end the almost 30% market crash.
Stock market is a forward looking mechanism. It may start rising even before the economy recovers. Major inflation happens in food & gas. Commodity prices are already stalling & if oil prices start to slow down, inflation will surely follow. Market sentiment may suddenly shift after the market has already priced in so many negative headwinds. All it needs is a “not so bad news” or when valuation becomes significantly cheap & smart money starts accumulating.
Not trading advice
A BIG MOVE is coming next Wednesday to Friday after another impt FED event. Last Friday, VIX was not able to reach 30 even with so much drop in the indices.
US dollar DXY & TNX 10-yr rate going higher. Money is rotating into safe haven like gold & dollars.
WATCH VIX carefully. If VIX reaches 30 before the event, there will be a shortterm rally. But if VIX remains low going into FED announcement, another capitulation will follow. There is a possibility the FED will be more hawkish by annoiuncing a 75 basis point rate hike in July or September. The FED needs to show it is serious in fighting inflation but many times it is just another FED rhetoric to condition the market & see how the market reacts.. Often times the bond vigilantes will do the job for the FED, without the need for aggressive hikes.
Small WAVE 5 prediction: ABC’s wave C is near completion & currently doing the final wave 5 of C. This small wave 5 will be 5 waves. Friday’s breakdown of 4k from the diamond reversal will be the first wave of 5 (1/5). Wave 2/5 will be the counter trend relief rally to fill the down gap. Wave 3/5 will be the big capitulation needed to push VIX above 30. Then Wave 4/5 & 5/5 may be the lower low to create a DIVERGENCE to end the almost 30% market crash.
Stock market is a forward looking mechanism. It may start rising even before the economy recovers. Major inflation happens in food & gas. Commodity prices are already stalling & if oil prices start to slow down, inflation will surely follow. Market sentiment may suddenly shift after the market has already priced in so many negative headwinds. All it needs is a “not so bad news” or when valuation becomes significantly cheap & smart money starts accumulating.
Not trading advice