First published Monday March 13 on Seeking Alpha: What a week we had last week. As we came into the week, I said I was standing aside, as I was not sure how this would resolve. But, I was going to give the bulls the opportunity to prove themselves early in the week. So, I laid out a very specific path they would need to take to suggest we were going to take a direct route to 4300, rather than the scenic route, which took us down to 3800SPX first.
As we went into Tuesday, the market completed a larger degree 5-wave structure to the downside. So, it was time to prepare for a retracement and a follow through to the downside. And, early on Thursday morning, these are the charts I posted to our members as the market progressed to our wave 2 topping target:As we now know, the market continued down quite rapidly from there, as my next lower target was the blue box below the market, as you can see from the charts above.
When I see markets react so perfectly, and almost to the penny on many moves, it reminds me of a 1997 study conducted by Caldarelli, Marsili and Zhang, in which subjects simulated trading currencies, however, there were no exogenous factors that were involved in potentially affecting the trading pattern. Their specific goal was to observe financial market psychology"in the absence of external factors.
One of the main themes I expected to play out during the bear market is another financial crisis based around the poor quality of our banking industry balance sheets. And, while many may have been convinced by the actions after the 2009 financial crisis that another such crisis will not again happen in our lifetime, I do not count myself amongst them.You see, the larger degree 4th wave bear market that I expect will be of a degree larger than the one we experienced in 2008.
Over the past year, we have been writing public articles outlining the issues we see at the major banks. While there are still many more to be covered, you can read the articles we have written here:Based upon the issues we have seen, it is likely only a matter of time before these issues come to light in a more public way, as they threaten to take down these banks over the coming years.
Support this coming week is in the 3750-3810SPX region. Resistance is 3912-3937SPX. While I think we can have several movements between support and resistance in the coming week, to make it easy, I will summarize my view by saying that as long as support holds, and we begin an impulsive 5-wave rally through resistance – which should target the 4014-4087SPX region - then I will be looking to buy a corrective pullback after that rally, with the expectation for a rally to 4300+.