Tuesday, March 17, 2020

INDU and SPX: Historic Call in a Historic Market

Last update noted that the preferred count target had been captured, and mused whether bulls could find support in that zone.  They did find enough support to put together a decent bounce, but that bounce has all but been retraced in futures, which are limit down yet again this evening.  In the forums, I noted that the low appeared that it might be a b-wave, and b-wave lows imply further lows to follow.  If we make a new low tomorrow, that b-wave call will be confirmed.

That said, we should at least be alert to the potential of (as I also wrote in the forum) an increasingly complex correction -- which could take the form of a "slight" (which could be 70+ SPX points, in this crazy market) new low, then a run back up toward yesterday's high, followed by yet another new low.  That's definitely an option here, given the past couple days of chop.

The worst case scenario (for bulls, and probably for everyone at this point) is still the dreaded fifth wave extension.  As of yet, there's simply no way to predict if that will occur... but the setup definitely makes it possible.  In fact, I ALMOST want to make that the preferred count, but I just can't wrap my head around it.

Since we are now, amazingly, PAST my original crash count target (which looked crazy enough when I first published it), I have highlighted some additional potential horizontal support zones, in blue.  Any of those could pause or end the decline.  The red megaphone is also a zone to watch, if we get there:

Next up, we can see INDU has reached the bottom of the long-term channel that stretches back to the March 2009 lows, which led to the bounce of the past couple sessions:

If SPX wants to match INDU, it could definitely run a bit lower:

Finally, I do also want to publish here (publicly) my February 27 forum-only VIX prediction, just for the record.

On Feb 27, I warned we could "easily see VIX in the 80s" before this wave was complete.  (As if there should be anything "easy" about VIX making history!)

On Monday (and again yesterday), VIX got there, as it traded above 80 for only the second time in history.  Long-time followers know I have never previously published anything like this in the forum -- so it's not like I've called for historic 80+ VIX levels a bunch of times and finally got it right.

I called it once -- and it hit.

And considering that we were BULLISH right up until a few points away from the all-time high, when we switched to a bearish footing, these (including the broad market crash call, and the oil down to $25+/- call) are (theoretically, I suppose) once-in a lifetime calls.

I also want to emphasize that since VIX has been in the 80s only once in prior history (October-November 2008), the odds of hitting a one-try call like this purely "randomly" are infinitesimal -- borderline impossible.  I've said it before and I'll say it again:  Anyone who believes the market is completely random and unpredictable simply doesn't understand the market.  It is indeed SOMETIMES unpredictable (such as now; whether the fifth wave will extend or not), but there are many times when it is wholly predictable, at least in a "odds strongly favor XYZ resolution" manner.

Anyway, very, very few analysts are able to include these kinds of hit predictions in their resumes, so forgive me for wanting to document this publicly!  :)

Thus, here's a screenshot of what I wrote in the forum on February 27, when VIX was still trading in the 30s:

In conclusion, we are still in an inflection zone for INDU, but if the futures action is any guide, we may make new lows tomorrow.  If we do, at least remain alert to the potential for a complex correction (discussed earlier).  Such corrections are not "predictable" per se, but it would not be unusual to see such a correction develop in this position.  Trade safe.

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