S&P 500 Are we about to drop it like it's hot?
Updated
Tracking our wave count for the S&P 500 we could be about to drop hard this week, with CPI reports due out on Tuesday and the Fed due to deliver another hawkish statement on Wednesday we could be entering into the wave 3 of C which will be a very sharp move and will demolish a lot of wealth in a very short space of time. We will move away from the narrative of inflation peaking and into a new narrative of inflation not dissapating as quickly as hoped. In turn the Fed will have to keep interest rates higher for longer than anticipated (which they have signalled in the past few meetings). This is likely to scare investors out of stocks and into cash, namely the dollar. The 'bullish' move up that topped on the 1st of December was just a counter trend rally (completing wave 2 of C) and was designed as such to convice traders/investors that the bottom is in and we are heading to new highs, drawing in the bulls only to swing rapidly to lows not seen since the covid crash. We feel a conservative target for this wave 3 of C would be circa 3200, a very nice 750 points of profit from current prices.
Note
Nothing has changed with our count, we had a blow off top for wave 2 on the 13th December and it is now looking like we've completed wave wave 2 of the smaller degree and as such should be about to move into wave 3 of 3 which will result in a very sharp and fast move down.Note
Note
This week should make or break our trade set up for the ES1!. If we breach the previous blow off top of 4180 then it's highly likely that we're going to the 4200-4300 area in what would be the B wave of a triple zig zag that would still take us down to our target of 3200, but we would have to move higher first to complete the alternate pattern in green.With the Fed meeting on Wednesday we should get some guidance on how the Fed sees the data and where they plan on going with their policy. Ultimately we should either break the 4180 high from the 13th December or start plummeting towards new lows in this wave 3 of 3. An interesting week ahead of us for sure!
Note
So it looks like we're lining up for a bit of an explosive move tomorrow for the CPI print, we're either in a minute wave 2 of minor wave 2 of intermediate wave 2, which means if we're right we could be about the start the slide for intermediate wave 3! 4150 is looking like a great area to sell! If it happens to be our alternative count in green then we will first drop to around 3950 before moving higher to the 4300 area. Tomorrow should be interesting!
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