MU - It's very rare that a Darvas box ends with price moving back in the direction from which it came.

I hope you guys have your exit plan, because this has a strong chance of butting its head and reversing down toward $60

Gun to my head, I think we see a drop into consolidation next week with some increased volatility followed by a blowoff top into February and March.

Good week.

Have an excellent weekend gentlemen.

Big week next week.

Heineken-Ashi said:

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MU - It's very rare that a Darvas box ends with price moving back in the direction from which it came.

I hope you guys have your exit plan, because this has a strong chance of butting its head and reversing down toward $60

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I'll bet a steak dinner, drinks included, that it fills the $125 gap before it see's $60. Bet?

Let's look at SPY.

Here's a view since the 2009 low in LOG mode. You can see the gray trend channel. The upper bounds is the accelerated portion. That's where this market has told you it's heated to an extreme that will lead to a potentially sharp correction. The middle line has supported almost every correction after it entered into the overheated channel except COVID, which went all the way to the bottom.

Now notice the Fibonacci extension. And remember.. this is LOG mode. SPX has almost reached the 261.8% extension of the first move it made off the 2009 low. In a steady, normal, non-extended market, a 161.8% extension usually marks a significant top and reversal. When you list all the Fibonacci numbers, if you divide a number by the one that precedes it and apply that to every number on the list, as the numbers get larger that relationship will start to approach 161.8%, and then it will stay there no matter how larger the fib numbers get. If you divide a number by the one that precedes the one before it, it will start to approach 261.8%. In other words


A $21 stock moving to $34 is growing 161.8%. It's like gravity for some reason. It's just attracted to that inherent growth rate. It's the golden ratio. It's found in the human body, cells, tree rings, flower pedals, the pyramids, shells, ocean waves, you name it. But that doesn't always contain a strong move. A really strong move can grow exponentially higher, and the next usual target is 261.8%. That $21 stock would move to $55.

But when measuring movements in the market, you need a reference point. In EW, we look for a Wave 1 top and then use the distance it covers to project how many extensions of that move will potentially happen from the Wave 2 higher low. Looking at SPX, you can now see where the fib extensions come from. And while 161.8% was STRONG resistance for the pre COVID top, we are now in that EXTENDED period aiming for 261.8%. And again, this is in log mode. So we're not even measuring number to number. We're measuring the % change between moves and smoothing them out.

Quote:

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A log scale displays numerical data over a very wide range of numbers, by making them more compact. The log scale is non-linear, which means as you move along the scale, the number has been multiplied by a fixed factor often by 10 or 100. In other words, the distance between $2 and $4 is the same as the distance between $200 and $400. The largest numbers in the data can be hundreds (sometimes thousands) of times larger than the smallest numbers.

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So not only are we approaching the next MAJOR MAJOR resistance, but we're approaching it an the most extended manner possible using log mode. A simple correction from that point wouldn't find support until the 200% extension at $440. A full-blown top and reversal would retrace this whole structure 50%-61.8%. Now you're back at the COVID low or lower. And you're not likely to see something beyond the 261.8% without a major correction first. There's just no instance in history of extending any higher without a serious drop.

So, looking at the trend channel and trajectory of Keltner bands, my green box shows potential timing. And do note, it DOES NOT have to get there. I'm projecting a top lower than $681 closet to $630-$640 as shown on my previous charts. But there's a chance I'm wrong and there's one more push up this year after that range hits.

Long story short, we are approaching the most extreme resistance levels that will likely be hit this year, and potentially quickly. Hence my "blowoff top" comment earlier. Please take it seriously.

So the S&P could go up significantly this year? That's what you're saying to take seriously?

Heineken-Ashi said:

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jamey said:

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So the S&P could go up significantly this year? That's what you're saying to take seriously?

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No, the context that it would be completing a cycle that started 15-16 years ago in blowoff top fashion. And blowoff tops lead to sizeable corrections at best, and bear markets at worst. I'll put it back in linear scale for context to see what it looks like when the market blows off a top. The % drops after are not friendly and the time to recovery is not usually quick.

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I really hope the blowoff doesn't happen, but we know it's coming and just a matter of when. I've had way too much cash parked for a year plus now at the ready for buying stuff at the new bottom, thinking the falloff was just around the corner. I've left so much money on the table by doing so, but now I really don't want to deploy it as the likelihood just seems more and more inevitable. In hindsight, there's so much more I could have done during the wait instead of just relying on 4-5.5% yield in a high interest savings account, but oh well.

Thanks for all the insights. You're keeping us all learning more every day.

zgolfz85 said:

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Heineken-Ashi said:

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jamey said:

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So the S&P could go up significantly this year? That's what you're saying to take seriously?

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No, the context that it would be completing a cycle that started 15-16 years ago in blowoff top fashion. And blowoff tops lead to sizeable corrections at best, and bear markets at worst. I'll put it back in linear scale for context to see what it looks like when the market blows off a top. The % drops after are not friendly and the time to recovery is not usually quick.

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I really hope the blowoff doesn't happen, but we know it's coming and just a matter of when. I've had way too much cash parked for a year plus now at the ready for buying stuff at the new bottom, thinking the falloff was just around the corner. I've left so much money on the table by doing so, but now I really don't want to deploy it as the likelihood just seems more and more inevitable. In hindsight, there's so much more I could have done during the wait instead of just relying on 4-5.5% yield in a high interest savings account, but oh well.

Thanks for all the insights. You're keeping us all learning more every day.

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Hey man, try being me. I saw a pattern that is more than 50% probability in leading to significant declines back in late 2023. Then we got the late year blastoff, and I couldn't bring myself to buy it until the downside potential invalidated. By that point it was too late, and I got caught waiting for a retracement that never came. Missed 6 months of gains that many here were a part of. Such is trading. My mistake? Was it getting cautious? Absolutely not. I would do the same thing again. Was it not knowing where the analysis was wrong? No. I knew that point. The mistake was not staying nimble and acting the second the market reversed course. Everything I do runs on series of pattern recognition and probabilistic outcomes. But if you're not willing to act when the probabilities shift, you fail. Props to everyone here who stayed long. I just wanted to show some context to caution.. there will be a time where that strategy fails. And I don't want anyone holding the bag. Please don't forget 2022.

So as of today, when do we know if we're going into the blowoff top so we don't miss it? Let's bring up the pattern this is working on since August 5th again with my two scenarios.



For orange to win out, we probably need to see one more little retracement and a tiny push higher to follow. We then want to see a higher low correction next week. From there, if you see 5 waves back up, that tells you to get ready. The next micro higher low correction, even if small, is where you get aggressive. This is illustrative of the type of action that would be "IDEAL". Please remember, it's rarely as recognizable as you would hope, so just watch for higher lows in a consolidation type pattern and I will alert if I think it's time to get aggressive.

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