$SPX #macro #weekly #weekend
This macro update will be discussing very long term scenarios. In particular , the main subject of this update will be to discuss if bulls have any chance to break over the Jan 2022 top.
Before I start talking about a bullish alternative counts let me show you a weekly chart of S&P 500 cash index with a bearish scenario:
The main starting point for any macro wave count is the pandemic low made in March 2021. That low can be considered as the bottom of a corrective wave ( 4 ) down, a consolidation that was shaped as a very tricky Expanding Triangle pattern (see (A) down, (B) up, (C) down, (E) up, (D) down structure on the chart below:
If the March 2021 low was the bottom of the wave ( 4 ) down then we need to count an (A) up, (B) down, (C) up structure off that low for the final wave ( 5 ) up.
We can identify two legs up interconnected by a small pullback. We can count that move up off the low made in Mar 2021 into the top made in Jan 2022 as the final wave ( 5 ) up. Note that the subwave (C) of wave ( 5 ) up stretched to a 114.6% ext of the subwave ( A) of wave ( 5 ) up.
If bears manage to stop this rally off the Oct’22 low right here two different tools point to the target the next leg down at 3,100 (SPX cash index):
First, a negative 138.2% ext of the rally off the Oct’22 low points to 3,098.
Second, if we measure the rally off the pandemic low made in March 2021 to the top made in Jan 2022 and apply the strongest 66.7% retracement we will get 3,070. That is a very tight confluence of fibs.
PART II. Looking for a path leading to new highs.
That long term bullish wave count actually makes a lot of sense to me:
Note how shallow that wave ( 2 ) down looked like. The alternation guidance suggest that wave ( 4 ) down may be quite complex and take a lot of time.
below I will describe two alternative bullish counts that pave the road up to 5,700:
As you can see, even under the bullish counts I can not consider the decline into Oct’22 as a completed (A)-(B)-(C) down structure of a large wave ( 4 ) down. That makes me expect another leg down before the real sustained breakout over the Jan’2022 top can happen.
The most reasonable count is to consider the decline into the Oct’22 low as the first leg down, a subwave (A) of wave ( 4 ) down. Then we can infer that this move up should be a corrective wave ( B ) up.
The problems with (B) up that they are wild and hardly predictable.
Very often they keep extending higher to a higher high over the top of the wave ( 3 ) up turning a corrective structure into the Running Flat or Expanding Flat structure. That subwave (B) up can top right here. Then bears should be able to push SPX all the way down back to the Oct’22 low in a subwave (C) of wave ( 4 ) down. But because bulls managed to push S&P over the 66.7% retracement of the 2022 decline, a super important resistance for any pullback, I can not exclude a scenario where that rally would keep pushing higher to a nominally higher high over the Jan’22 top. In that case, this rally could extend to 5,000 SPX in a subwave (B) up of wave ( 4 ) down, followed by a 1,000 point drop to 4,000 in a subwave (C) of wave ( 4 ) down.
At this point of time I would assign not more than 25% probability to that “a new higher high” Running Flat scenario and 75.5% probability for the scenario where S&P would turn down without making a new higher high.
Let’s get back to the micro level:
Under the weekly MACRO BEARISH scenario and one of weekly Macro Bullish scenarios ES/SPX is about to top in a large corrective wave (B) up. The bullish micro allows bulls to make one more push higher to 4,580 – 4,600 before that wave ( B ) up tops out and bears start a new leg down in a large wave ( C ) down.