See first: A Look at Current Action and the Covid Top. (substack.com)
Throughout today I’ve learned I don’t have to worry about getting bird flu because I might get nuked.
Today there has been word of Iran and Israel conflicts. The wider concern being escalation and involvement of NATO forces and a big war. As with bird flu, I’m not going to play topical expert. I don’t like the sound of it. Hope for the best. We’re going to focus on the TA.
Which will be a strong theme if it happens to be the case there’s some terrible real world event and a resulting crash. If big things are happening we’ll make brief mention of them for context/documentation but we’re not going to discuss how they affect markets or any sort of personal politics.
I have strong reason to believe in market reversals the norms we’re using signal the reversal levels long before price gets there. Then big news compliments it.
It sounds dumb - but it has happened time and time again. In my personal experience I’ve now seen obvious TA signals produce the drops in 2020 and 2022. With the breaks for these coming with the Covid news and the Russia invasion respectively. Market tops have always come with different news but similar technical signals.
I will say I don’t hope for bad things. My technical analysis and market bets are not a reflection of things I hope for. Especially if the driving news behind it is disastrous. Having studied market crashes the confluence of signals we have is intellectually fascinating and emotionally terrifying.
If sensational events happen in the world this newsletter is never going to be an “Opinion Piece” sort of thing. The purpose is to teach you actionable methods to plan specific levels and types of action to make bets in the market and know where to get out if it’s not going your way.
Whatever happens, it’s just a chart. Over the last years I’ve shown scores of examples of these concepts working for big bear moves. If the signals fire on the biggest scale, we’ll execute in just the same way. The usefulness of concepts in recent bear moves is well proven and as such will be used until they are disproven.
We’re going to stick to speaking about what we know, even if events happen that mean there’s a lot more to speak about.
Onto the TA.
That is a hell of a chart. Almost no bullish bars on the 5 minute chart.
This is what happened off the 76 fib posted previously.
That’s some stuff.
If it turns out that’s a high made it’s possible the bear trade plan gets really easy from here. I know it sounds arrogant to say but if you knew a few things understanding how to make a decent bear plan before any of the previous big drops has been rather trivial. People just don’t think it’s possible so they don’t try.
And there’s usually news which distracts everyone.
The bear break pattern from here is easy. A failed butterfly sometimes chops 1.61 - 1.27 for a while but once the 1.61 is broken there’s a capitulation to the following fibs.
If you’re new to reading I want to be clear when we talk of “Capitulation” we mean strong consistent drops. Certain pattern accurately predict capitulation moves when they work. This isn’t to say they always work. But when using that word a specific style of strong drop is possible.
Real move was much like the forecast move but we didn’t even bounce on 1.27. I do think we’re still likely to see a bounce from 1.61 back to 1.27. Would be very surprised to see the market continue to sell through. While it may be largely range based in hindsight, I’d expect some type of bull trap before a true 1.61 break.
Clean breaks of big 1.61s on the first try are very rare. Exceptional. If one happens a really strong move is likely. Much more likely is we chop a bit through Friday.
If the 1.61 is broken again, capitulation to following fibs. As per the forecast at the high.
The butterfly failure pattern is a great crash signal pattern. Really, it’s a great breakout pattern. It can be used for bull/bear side. When it happens bear side of big charts, crash events are happening. Price moves around the 1.27 - 1.61 zone can be really tricky but clear strong bear action after the break.
But we have something else we can do now which may help us to be able to foresee all the big important swings over the coming weeks. Let’s look at that and build a roadmap.
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