Things are starting to get a little ugly for the broad market bulls (but beautiful if you are bearish) as the engineered takedown is now down more than 10% since the Top Spotter signal on September 21st.
Under the range envelope bottoms we have a bearish trending breakout looking for a place to bottom. So the big question is… where might that bottom come?
click on chart to enlarge
For clues, let’s take a peek at our old friend, the weekly bars chart.
On the chart above you can clearly see the paradigm that has been driving this secular bull market since the bottom in 2009.
For some of you newer readers, here is a quick refresher of our Weekly Bar Paradigm…
- Each candlestick bar represents one week in the market
- What we are interested in tracking here are four-bar pivots.
- I have market each pivot low with a green dot and each pivot high with a red dot on the chart above.
- We are mostly interested in the pivot lows since this is a bull market as defined by higher lows
- There have been only nine instances since 2009 where price has dropped below the last pivot low. Each is numbered on the chart above.
- In seven out of nine instances, the dip below was immediately bought and was a perfect entry to ride the bull. I call those areas ‘stop sweep reversals’, because once the pros ran the stops and achieved capitulation from the bulls–the market was reversed on the ensuing doubled buying (to cover shorts and to establish new long positions).
- Only twice, at points 2 and 6, did the market not immediately recover. Those two places are highlighted in yellow and correspond to waves 2 and 4 down for Elliot Wave enthusiasts…or just ‘market corrections’ to most traders.
- Note that the most recent higher pivot low occurred at 2560.75 way back in April of this year.
Okay, so take a look at the chart above and try to picture three options ahead…
- The current decline halts at or above the last higher pivot low at 2560.75
- The decline breaks under 2560.75 and we get our seventh stop/sweep reversal
- The decline breaks under 2560.75 and keeps going
In my opinion, this engineered pullback by the pros is them gaming the upcoming mid-term elections, which occur on November 6th here in the US. President Trump has made a LOT of enemies amongst the global socialist crowd and this engineered market assault is just one of many fronts being used against him to try to affect the election. The World War II division-sized invasion force heading north through Mexico is another. The silly fake bombs, and no telling what other sort of subterfuge yet to come. It’s all evil, it’s all fake, and is just what those people do.
Unless we get a bottom before 2560.75 to eventually set a new higher pivot low, then it is plausible that we could see an interaction with 2560.75 (options 2 and 3 above). It would make me laugh out loud if the pros do another stop/sweep reversal–but if that happens, then remember that you heard it here first.
When we get a new tradable bottom, I would expect to see huge numbers of Russell 3000 Bottom Spotter signals over at stopsandtargets.com. That’s been the previous pattern for a significant bottom and was last seen in February of 2018.
So, what happens if we see scenario 3 develop? If that happens, then the paradigm that we have been following here (and feasting upon) since 2009 will change. The next major target lower would be the very long term trendline.
I’ve been hearing from lots of my old bear friends recently who have been in deep hibernation. Howdy everyone! It’s been a very long time since bears have had anything to get excited about. This market is definitely cyclical bearish now–so continued happy hunting on the short side…but watch out for those range envelope counter-trend buy signals, and especially for the Bottom Spotters when they come. The eventual short-covering rally, once this push lower abates, could be epic!
click image to enlarge
Head’s Up right here: The daily bar/range envelope chart above shows a bounce, as I type, off of intermediate trendline support. Let’s see if that holds.
If not, then the blue dashed line shows the target of an A = C price and time leg down from the Top Spotter. The blue shaded area is at that target of 2589.50 on, you guessed it, Mid-term Election Day.