Tl;dr: Technical indicators coupled with upcoming events and the context of the current market as a whole, strongly indicate the market is either about to take a massive nosedive of the cliff, or have one last ramp to the moon before it burns on re-entry. Either way, massive moves incoming, beginning this or next week. A few charts help visualize this.
OK, so here is a useful nugget of technical analysis on S&P500 that should shed some light on what is about to happen next…
Unless you’ve been living under the icesheet of Europa, you should be well aware by now that this market… all of it, across the planet, although it’s the US we’re concerned with here… is heading for a “Day After Tomorrow”, Tsunami-sized crash and depression that hasn’t been seen since 1929. The only real question right now, is:
Is this it? Has this downturn marked the peak and were standing on the edge of the cliff, our center of gravity already leaning over? or is there still a last bump, a final ramp, to this madness, before it all collapses like a wet sandcastle?
Time will tell, but for speculation purposes, there are some neat technical indicators we might like to take a look at if we decide to speculate the moves to come.
I will use three S&P500 E-Mini Futures charts to illustrate this.
Of note, is the simplicity of the charts to follow. The best chart work is simple and suggestive, not some convoluted overlap of schizoid drawings which could be mistaken for attempts to invoke some esotheric spirits.
To that end, the features of interest in these charts are as follows:
• 2 × Fibonacci Extentions, different scales
• Quad Witching Dates
• Death Cross
• Main Trendlines of this cycle
• 3-Standard-Deviation Bollinger Bands (they just sit there)
Chart 1 – Trendlines: IMAGE
You’ll notice the 3 trendlines originate at the origin points of the main bull markets of the last decade. This nested fractal-like feature is pretty common with bull runs, on any scale. As the length of the runs compresses, their amplitude increases.
You’ll also notice a big Fibonacci going from the ’07 peak, which is almost the same as the ’00 peak, to the ’09 trough. Bull runs love to peak around the x.618 or x.236 extensions, where ‘x’ is usually between 1 and 5, and this market seems to be no exception, after pinball-ing through all key levels.
NOTE: The 4 main trendlines neatly converge to a point. Also, the point coincides with the 5.236 retracement.
Chart 2: IMAGE
The Fibonacci in “Chart 1” goes from the Feb2020 peak to the Mar2020 trough, and follows the ensuing run as it plays pinball against the key levels on to new highs.
For those still unaware of the meaning of a Quad Witching, it is when a bunch of option expiration dates overlap, spawning all sorts of complexities and ramifications. They affect volatility and often price too.
NOTE: The current downturn has found support on the 1.618 extension level. The 2.618 level also coincides with the intersection of the main trendlines, just like the 5.236 in the other chart.
Chart 3: IMAGE
This chart is a close-up of the first one. Upon this closer inspection, you can see the current All-Time-High neatly hitting the 4.618 level, which is one of the most popular peak levels for fractal bull runs like this one.
You can also see, the dreaded “Death Cross” forming. That is, the 50-Day Moving Average piercing the 200DMA to the downside. Now… here’s the deal with these crosses. They can be fakeouts, from both sides. When a market is indecided such as this one, and the cross is young, it can flip back around and continue what it was doing before. This could be one of those times, or it could be a glaring signal that this bread is toast.
NOTE: Current peak at 4.618, a still-young Death-Cross, 5.236 Fib level matches trendline convergence.
And finally, the FOMC meeting is about to happen not far from Friday’s Quad-Witching.
There are so many stars aligned here, it’s a Conga Line of stars. Clearly, there is a massive amount of pent up energy in this market… with an upcoming Quad-Witching and an FOMC meeting, after 2 months of bouncing into a descending wedge, with the 50DMA having just touched the 200DMA… there are 2 main directions this can go:
DOWN – the 4.618 Fib was the peak, the market never retests that trendline and it all collapses at breakneck speed. Your DOOM Puts will finally pay if you cash them right and you’ve witnessed the beginning of the end.
UP – after FOMC/QuadWithcing, the market does one last quick and furious run towards the 5.236/2.618/Trendline-Convergence area, a.k.a “The Moon”, with some bounces along the way at key levels, and while it might not hit it exactly, it would be a ramp to behold… before detaching it’s boosters, hovering for a moment followed by a fiery re-entry and ballistic fall: see the “DOWN” paragraph above.
Whichever way it goes, a lot is pointing towards it going big. If you buy option strategies to take advantage of the big move, regardless of direction, you might make big bucks on the fall, or pretty good bucks on the rise. And if it goes up, then you can quite confidently put it all in DOOM strategies, since the only way from there is down, and that should pay even bigger bucks.
This post by no means covers the “whole” picture. It just presents a neat juxtaposition of technical signals and their translation.
Submitted March 15, 2022 at 01:15AM by SirRobertSlim
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