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Hello everyone! The past week was a major victory for the bears as they finally found some much needed downside acceleration. While there will plenty of speculation regarding ‘oversold’ conditions, which may be completely valid, I will keep my main focus on trend, structure and the supply/demand equation. For the moment, trend is down and supply is in control – therefore I must continue to give the bear counts the benefit of the doubt until the bulls prove otherwise.
- No changes to the macro counts. The Russell index continues to lead the pack as it has taken out demand and is charging towards the 2022 lows. All four indices are turning south from significant supply.
What Happened This Week?
- Coming into the week I discussed the nested 1,2-1,2 potential, conditional upon downward expansion no later than Wednesday. Sellers took their time, but finally found acceleration and follow through. Simply put, the bears did exactly what they needed to in order to maintain control of the situation.
Mid Term Outlook:
- The mid-term counts remain unchanged as well. I am looking for the current w(3)’s to be completed this week, followed by sideways w(4)s. Bears simply need to avoid a sharp and sustained bounce on the way to the main targets of ~4130/14k.
- $RTY is still the weakest while $YM continues to lag behind, just slightly. This divergence is not a concern at the moment, but I would like to see the Dow catch up sooner rather than later.
- The trend-lines discussed last weekend have been sliced rather convincingly… While of course breaking a trend-line does not necessarily imply continuation, this particular break serves as added confirmation that both trend and structure have shifted in favor of the bears.
Short Term Outlook:
- Both $ES and $NQ found strong reversals from supply yesterday, with $ES forming a new low. At first it appeared that this marked the end of the lower degree w4s and the start of w5 of (3), but the volatility into the close shook things up…
- Yesterday’s moves from high to low concluded as 3 wave structures. Additionally, $NQ did not break Thursday’s low as $ES did. This has me suspicious of running/expanded flats for w4… I will be on watch for rallies back into supply to start the week and set up another short opportunity. If price continues directly lower on Monday, the idea of w4 flats can be disregarded. In that case my attention would shift to navigating w5 of (3) down.
- I remain almost exclusively focused on short opportunities. Other than perhaps a scalp or two, I do not wish to force longs against this downtrend.
- One way or the other, I am looking for w5 of (3) to take place this week leading into a sideways w(4) correction. Alternation suggests that since w(2) was deep and complex, w(4) is likely to be more shallow – perhaps a triangle or flat.
For now this is just speculation and estimation, the specifics of these waves will be made more clear as structure develops.
“But…Could It Just Be Wave 4?”
- Could this just be a big wave-iv within the alternate count…? Technically, yes… But I do not find it likely at all. This would require a sharp and immediate reversal from the bulls, which does not fit with what the lower timeframes are showing. Additionally, there is plenty of supply that bulls would have to fight through in this scenario. Another hundred points lower would officially invalidate this idea.
- In addition to the issues with the $ES bull count mentioned above, $YM has also eliminated most reasonable bullish counts.
- To be clear, my intention is not to criticize bullish ideas or declare that there is “no chance” of a bullish reversal… But from a trend, wave and supply/demand perspective I find the bull counts to be low probability. The bears have earned the benefit of the doubt. To change that, bulls will have to prove themselves in a major way.
- $GS has reversed from the 0.618 fib within 2D supply and printed 4H supply on the way down. This 4H zone will be a major area of interest for me on the retrace, with a target of 278.
- $ARKK has shown extreme weakness following the reversal at 1D/2D supply. I will be looking for short opportunities within the growth sector over the next few months.
- Apple has held up somewhat well despite the weakness in the indices, but I expect that to change soon. Bears want to see the next leg down extend towards 153.