SPX island reversal below invasion dip may force H&S correction
Diupdate
BULLTRAP?: SPX’s recent gap up above the invasion low of 4115 & above the blue neckline of a H&S formation may be a bulltrap. This will happen if bears will gap down below 4115 to make an island reversal.
This may re-set the H&S pattern into play & the 6 impt supports will be the ff:
1)4000, a 17% drop is also the intersection of the 2009 TL with my green 2021 Megaphone baseline.
2)3800 is the current bottom, a 21% drop coinciding with the 0.382 Fib retracement of pandemic low to
ATH.
3)3500 is a 27% drop coinciding with 0.50 Fib. It is also where Nov2020 vaccine rally begun.
4)3400 is a 30% drop. It is also the pre-pandemic top from where SPX broke out last Nov2020 to confirm
a wave 3 of a new secular bull market. 3400 or 3500 could both be a retest of my green Megaphone top from 2018.
5)3200 is a 33.4% drop coinciding with 0.618 Fib. It is also a retest of the blue dotted median of the Big
Channel started in 2009.
6)3100 will be the ultimate 35% drop similar to the pandemic plunge.
BULLISH SCENARIO: If SPX consolidates & holds the 4000 to 4200 zone in the coming weeks, we may see a very choppy & volatile rally from the baseline of the green 2021 Megaphone pattern to ultimately reach 5345 in middle 2023. 5345 is the 2.618 Fib measure of the pandemic plunge where the top line of the Megaphone will intersect.
Not trading advice
This may re-set the H&S pattern into play & the 6 impt supports will be the ff:
1)4000, a 17% drop is also the intersection of the 2009 TL with my green 2021 Megaphone baseline.
2)3800 is the current bottom, a 21% drop coinciding with the 0.382 Fib retracement of pandemic low to
ATH.
3)3500 is a 27% drop coinciding with 0.50 Fib. It is also where Nov2020 vaccine rally begun.
4)3400 is a 30% drop. It is also the pre-pandemic top from where SPX broke out last Nov2020 to confirm
a wave 3 of a new secular bull market. 3400 or 3500 could both be a retest of my green Megaphone top from 2018.
5)3200 is a 33.4% drop coinciding with 0.618 Fib. It is also a retest of the blue dotted median of the Big
Channel started in 2009.
6)3100 will be the ultimate 35% drop similar to the pandemic plunge.
BULLISH SCENARIO: If SPX consolidates & holds the 4000 to 4200 zone in the coming weeks, we may see a very choppy & volatile rally from the baseline of the green 2021 Megaphone pattern to ultimately reach 5345 in middle 2023. 5345 is the 2.618 Fib measure of the pandemic plunge where the top line of the Megaphone will intersect.
Not trading advice
Catatan
IMO…if the current 4000 to 4200 zone fails, 3500 is the most probable bottom since 3500 is the top of wave 1 on a weekly closing basis. EW theory states that Wave 4 should not end lower that the top of wave 1.Catatan
Since wave 2 is a very shallow 0.238 Fib retracement of the W1 from pandemic low, I think wave 4 should be a very deep 0.786 retracement & that puts us right on top of wave 1 top at 3500 on a weekly closing basis.If the bullish case plays out, next resistance zone 4400 to 4500 is well within reach & it is possible to retest ATH early 2023. This scenario will suggest a FED pivot to less hawkish stance 4Q2022 after seeing inflation & 10-yr yield easing & the FED has achieved a substantial slowing down of the economy.
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