Basic bear levels failed.

Best to plan for all outcomes now.

The simple bear trend has failed. This isn’t necessary a “Low’s in” / “New bull market” signal - but it’s certainly something that dictates we need to have rounded trade plans and be ready to deal with big moves in either direction. I think the next 400 - 600 point move is liable to be an extremely strong one.

Let’s be prepare to cover either side of the possible strong move outcomes.

The warning for bears

The basic bear market rally setup has failed. By the classic trend rules, we should have made a high on the 76 and the recent rally should have failed before making a new high.

In a simple downtrend we’d have expected this rally to be fairly shallow. Some more tolerance for stop runs (Which are more aggressive these days) but we should not have broken the lower high structure.

While the market will make spike outs in a downtrend, after the spike out has been made we should be back to the lower highs. Notice the crash comes after the spike out, new low and shallow rally above.

If we relate this to the current market, after seeing the spike out and new low this rally should have been limited. Ending in the red zone (And we added some tolerance for spike outs shorting at the 76 fib).

So at this point, the repeat of a 2008 style crash has failed. If it comes from anywhere around this level, this has been a brutal spike out. We’ll plan for this also, but it’s best to also consider what up moves would tend to look like if we were making a move higher.

The 2007 model

I mentioned this back in early 2022. We went lower than I expected it would in a like-for-like of this move (But maybe just stop runs). We may be in the early stages of the last rally before we go into a major sustained crash. We’re not talking a “Melt up” hyper boom here. Rather a deceptive spike out going only nominally higher.

BTC showed us a really good example of this.

And while BTC was in the early stages of that last rise, public attitude felt much like it does now. Hyper confident bulls and bears. Both feeling it was a baked-in conclusion we were going to either capitulate imminently or a new bull cycle to at least 100K was under way.

It’s like that now. Polarised views. Most people expecting something big and definitive. Maybe we get the move that falls right in the middle of those and stings the most people.

In the 2008 move and the BTC move, the time it took from the low to the high was double the time it took from the high to the low. If this sort of thing was to happen, anyone persistently bearish would be heavily depleted by the time the move came. Not something to be unaware of.

This type of move will usually be really easy to deal with from a trading perspective. We have the formation of a “W” off the low. We can draw the wouldbe harmonics and we can trade these levels as reversal/breakout levels. We’ve shown many examples of how these help us to determine a pullback from a real breakout.

The Butterfly Pattern

In a nominal spike out type of pattern we’d be pretty close to the short level but yet to see the most explosive move of this correction. We’d spike up to around the 161, filled the butterfly and head into a hard downtrend when this was broken.

In this type of move we’d typically see the final move happening really quickly. A week or two at most (Maybe a month if we factor in range weeks). Top would be quite slow and then the sell off would be strong. We’d be expecting to see a new low in max 6 weeks from the start of the selling (Based on it usually taking 1/3 of the time for a trend leg to complete than a correction and we’d have corrected 3-4 months).

The rug pull harmonic

This should end before the 220. The pattern technically failed on the previous high. Some spike out tolerance (Although I find the 220 very rarely breaks and touches of it tend to be big warnings). Us being back up here is really had for this pattern. This would need to sell off strong imminently to be valid.

The Bullish Elliot Waves

If we drop in a couple legs and make a big low 4070 area we may be in bullish Elliot waves. If this is the setup, trading will become very easy buying local 76 retracements. Planning our trades for the next 400 or so points should be really simple. We’ll cover this more if it becomes actionable by us seeing support 4070.

Biases and Plans

If we break above the highs, I am just using simple long trend continuation strategies. I’ve been short into SPX squeezes or reversals before, I know it’s super easy to make money long using the most basic of strategies. Usually the only hard thing about it is suspending disbelief regarding how easy the trend will be.

Above the highs I think we’re going to at least 4300 - 4500. We might be going to a new high in the spike out pattern. We’ve not given any time to it in this piece, but of-course we may also see the big extended blow-off or a fresh new uptrending bull market. We can look more at both of these if we rally.

My current bias is we drop to 4070. If we can make a strong bear break of there and 4040, I may again be a believer in the bear trend. However, I think right now the most obvious thing to do is limit order 4070 with a stop 4030. I think there’s a good chance we’ve made a breakout and a drop to there would be a retracement rather than a bear move.

My bias skews to bullish now. My personal bias is not something to put a lot of weight in. I’m probably going to feel bullish at highs. I’ve enough experience in the market to have self-awareness on my intuition - it’s not great. But while we’re not able to hold the 76s in the downtrend the bias there is higher.

Bears getting under 4000 would probably flip my bias back to bearish. However, price filling this level would break a lot of the norms I am using for analysis and would trigger an overall reassessment. Us getting under 4000 without getting over 4300 would be confusing for the strategies used.

• Primary bias is buy a dip to 4070.

• Bull plans failing under 4000.

• Price breaking 4195 triggers long breakout trades to 4300.