Usually at the weekend I like to take the time to fully cover the cases for both sides. Today I will give a cursory mention to the bull side but it’s going to be a bearish analysis. The glaring warning signs of a break setting up are too obvious to ignore. If the break fails, we can easily pivot.
Bull Case
This might be a bullish butterfly with price action confirmation. If it is, then it’s moon. That’s it. There’s my bull case.
I’ll back it up with this: Every possible bull trap since 1929. - by HoleyProfit (substack.com)
And this:
If you want to read the bull case, it’s been very well covered what to do around this price before we got to this price.
For multiple reasons this seems less likely to me now (I have to say, I’d much prefer a rally at this point but preference has no place in plans). So in this post we’re going to deal with the case for a crash to under 4000 in SPX and also we’re going to look at our specific entry points in such a move.
We’ll probably also follow this post up with specific aggressive option trades we may take at each part. Maybe will do that over the weekend and if not we’ll for sure do it if the pre-conditions for the crash leg setup in the week ahead. The forecast is not a crash next week - but next week could setup the obvious entry.
I very much dislike timing forecasts because they’re usually very hard to get right but here the implied time is actually obvious. If the market plays out as this analysis implies, the crash leg from around 4280 to around 3800 will come on the weeks starting 16th and 23rd of October.
We should be in a downtrend starting from next week. A rally late into next week and the first big positional area coming into a rally on Friday the 13th of October (This is in no way a superstitious forecast- I’ll provide all the work to support this). If you’ve followed my work for a while you’ll know I never get this specific with dates.
However, I’ve made an exception this time because, in theory, at this point we can map out exactly how a crash fitting historical norms would come. We can plan specific areas, specific dates and know exactly where our best odds betting on it are. At this point, what to do in a break is very obvious.
In this post I’ll aim to first prove to you that there’s a good case for us being able to make specific forecasts like this and I’ll provide you with a forecast and highlight the areas we want to make our decisions/bets. This gives us our roadmap and if we see markers of that hitting next week, it’s time to make big crash bets.
Here’s the broad bear forecast.
And here’s the work that supports this forecast (Which aims to be specific in the drops/bounce areas).
Keep reading with a 7-day free trial
Subscribe to Market Forecasts and Trade Plans to keep reading this post and get 7 days of free access to the full post archives.