Long

S&P 500 - Short Consolidation, Rally 3400, Crash 2930

Updated

Reworked all of my analysis techniques based on previous S&P 500 rallies/corrections and the first half of this rally. My focus is entirely on parallel channels and Elliot wave theory. It is not perfect by any means, but seems to fit all the cases I tried pretty well. However, even the smallest of errors in the peaks of waves or large noise can make a dramatic effect. That is what happened to me during the massive FOMO rally following the "fake" jobs report. I have since gone back with my new technique, and it lines up perfect now.

Take this for what it is worth. My current model predicts another day (or so) of consolidation (any drops should be within Thursday/Friday's range or a touch lower), a strong rally to 3400 by mid July, and then a crash to 2930 by end of July. Then repeat motive-corrective wave cycle, but hopefully at a more practical rate with less aggressive rallies and thus smaller corrections (hopefully no more crashes). I will update model as the coming weeks pass and new data is available.

As always, hope this helps and happy trading.

MOTIVE WAVE
Wave 1 and Wave 2
Sub-motive channel

Resistance 1 = end of corrective wave B
Resistance 2 = end of motive wave 1
Support 1 = beginning of wave 1 (end of corrective wave C)

Wave 2 must break the sub-motive channel

Wave 3
Sub-motive channel

Support 1 = beginning of wave 1 (end of corrective wave C)
Support 2 = end of wave 2
Resistance 1 = end of wave 1

Wave 4

Wave 4 must break the sub-motive channel
Note sure if using the triangle pattern to estimate end of wave 4 is true!

Wave 5
Sub-motive channel

Support 1 = end of wave 2
Support 2 = end of wave 4
Resistance 1 = end of wave 3

CORRECTIVE WAVE
Motive channel (black) --> Must break

Support 1 = start of wave 1
Support 2 = end of wave 2 or wave 4 (depends on which is lower)
Resistance 1 = end of wave 3
Resistance 2 (optional) = end of wave 1

Corrective channel (orange) --> Must stay within

Support 1 = end of wave 3
Support 2 = end of wave 4
Resistance 1 = end of wave 5

Motive-Corrective Cycle channel (dark red) --> Must stay within

Resistance 1 = end of wave 1
Resistance 2 = end of wave 5 (wave 3 is ignored because it often is too bullish and breaks channel)
Support 1 = beginning of wave 1

Note

As usually, the posted idea chart gets a bit distorted compared to my version. Simple fix is:
1) Zoom all the way out with the + button. This should put all the labels in the correct location.
2) Right click on the y axis on the right side and uncheck the auto scaling. This will allow you to move around the chart.

Note

- button not + button

Note

Monday morning futures are down sharply to around Thursday's lows. My assumption is that this event is similar to the strong correction wave during April 1-3. A very strong rally followed by a very sharp selloff and then several days of significant thrashing and testing of the low multiple times. It is even possible that a short duration "spring" in the next day or so could touch the fib ret line to kickoff the next motive wave.

A good time to hold tight and wait on confirmation on the true direction. I obviously believe it will make a move to the upside, but anything is possible in the stock market.

Note

10:38 am update.
Market gapped down to 2967 past the previous low on Thursday. It was rejected right away followed by a small rally to 3010. That is a promising sign that it was rejected when it broke the support level. However, markets fall in waves, so keep watching which way the successive peaks finish. If we stay around the 3000 level by noon, then I would say that the worst case of a bigger drop is not likely.

Note

End of day update.
Finished strong today. The gap down this morning had all the signs of a spring. Now its time for the final motive wave 5.

Rally mode all the way to mid-July! Just make sure you packed your parachute to jump off.

Dr_Roboto

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