Here’s things you get used to seeing in a top:
Before the top there is extreme bear sentiment as the market is rocked and looks like it will break.
During the early rally there’s scientism. You’re deemed a hopeful fool if you have a long bias.
Late in the move there’s a rush of new bulls but also staunch bears.
These bears are usually shaken out by a series of ranges, sharp drops and spike highs.
The market usually advances to highs fast and then tops slowly. First explained this sequence of events back in 2021 before we’d made major tops.
And this looks similar now.
We may have seen this section in the failed new high.
And we may now be making the real break.
In yesterday’s post we said to look for possible Elliot structure signalled by a bearking of the rally low. This is wherewe’d be in the EW template.
SPX
Nasdaq:
If we have triggered the wave 3 breakout, we should see consistent selling from here on out. It should be simple to follow the trend with tight stops usi9ng basic trend following rules. If it is anything less than easy, I’d just get out and leave the tricky stuff to someone else.
I think we’re now firmly inside of value areas for a bear bet. All the historical odds support us taking a shot here. With that said, I’ll repeat yet again that these bear patterns would not fail gracefully. It would be a real rip. So be careful with stops, follow easy action. Get out quickly to try again higher if it fails.
Pre-rally I spoke many times of the opportunity costs of being incorrectly short at the wrong levels and getting squeezed. However, we’re now at the levels it was worth sitting out and waiting for. While we may see higher, bear momentum is worth following now.
Have to say, I’d be happier if we’d tagged 4530. While upper resistance levels have not been tagged we’re best to keep them in mind as risks. But trend is trend. If we’re in a lower lows and lower highs trend, it’s easy to short and follow until that no longer is the case.