What if the worst is yet to come?
During the drop – I was expecting some kind of bounce — ideally, was eyeing the 2843 ES region which the market slide through but never retested. Except, we never got a chance to retest it. The market just went straight down. So it appears more like a wave 2 drop after a completion of a 5 wave move.
Usually the wave 2 drop will surpass the bottom of wave 4 — which is the February bottoms earlier this year.
If this is the case, the market will eventually get below 2550 ES.
But in terms of timing, that’s trickier. Will we chop around and get their sometime in 2019?
Or will we drop quickly and then suddenly reverse?
Hard to tell at the moment.
But if this is a wave 2 drop, the selling would be more than expected and any bounces would not last very long. So I don’t know if it will play out, but the possibilities of a crash have increased.
Previously, I was looking for the S&P‘s to top over 3,000 — but it seems we got cut short. The top was when the US struck a trade deal with Canada – with the potential expectation that if a trade deal could be struck with Canada — then China would be next.
Well, guess not.
Even earlier this week, Bloomberg reported that Trump is putting together a deal for China — markets rallied overnight.
But by the next morning, officials denied that report.
After all, it does appear we completed a 1-2-3-4-5 pattern on the monthly chart:
Well, FB dropped that massive amount during that earnings call – making history of the largest wipeout in market value. Since then, it has not recovered from over $200 to $150ish.
AMZN got crushed and after earnings got crushed again.
AAPL reported and went down 10% – and even changed the way they would report earnings – saying they would no longer detail out the number of iPhone units shipped – causing some to fear that there’s something hidden under the hood.
So it seems expectations for 2019 earnings overall could be ahead of itself and we could be going through a period of companies reducing guidance. Combine this with a Fed that is raising interest rates repeatedly — against Trump’s wishes plus the midterm election uncertainty — it seems thew wave 2 down could become a reality.
But shorting could be dangerous too. What happens if we crash like we did during the 2016 Trump election — and then by the next morning, the market’s actually up? Will that happen again this time?
I’m leaning towards no. I’m leaning towards the election being less market moving — and then afterwards people start to digest the implications of what is about to happen.
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