Market Indecision 2024! (Diamond Reversal)

15 Sep

It has been an interesting few years in the markets. One of the hottest bull runs coming off the Pandemic lows to a 7 month bear market in 2022, followed by another epic bull run! We are now at a major decision point for markets. Up or Down! Recession fears abound while small caps are ready to pop waiting on rate cuts. The S&P as lopsided as ever with Mag 7 carrying the entire index for 2 years. Where are we going next?

At every "potential" market top, the convergence between an ascending channel meets a potential descending channel forming a diamond shaped pattern. This pattern is the indecision point of any given market, but don't get bearish yet. A diamond reversal pattern can break in either direction, reversal or continuation.

I have documented both the historical moves and the future potential paths. Remember that markets are not pre-ordained to do anything. They have to make decisions, and while you may have already decided your personal view, you can let the market confirm your biases one step at a time.

React! Don't predict!

1) Halfway mark from 10/23 run to $6000 target
-4/19 bottom starts 2nd leg
-Bull Flag Consolidation

2) Diamond Reversal (Minor)
-Rate cuts? Yes/No
-And Why? Economy vs Inflation

**Upside Breakout on 9/13

3) Rate cuts hinted for Sep FOMC
-Halted 38% run from 10/23
-Halted 62% run from 10/22

4) Required drop to form minor/major diamond of indecision.
-Blamed on Japanese Carry Trade*
-Note the drop is perfect 78.6% retrace from 4/19 Run

*Japanese Carry Trade margin collapse was instead caused by formation.
**This was also opportunistic early rotation into treasuries.

5) Bullish rejection of minor diamond
-Resilient CPI and Jobs provide cover for soft landing narrative.
-Note the rejection confirms on diamond neutral line @ 38.2% 4/19 fib and healthy 20WMA bounce

6) Rate Cuts!!!
-Rate cut odds are near equal between .25 vs .50
-Note a rejection confirms Double Top
-Breakout confirms $6000

7) Blow off top!!!
-Note the identical pattern to 2022 top
*The Ancient Trendline is based on a back-dated creation of the S&P 500 by Standard & Poors as the index was founded in 1957

8) Bullish Ascending Channel starts in Jun-Oct 2022
-A short break here confirms new bearish descending channel and major diamond reversal.
-This will be your bearish hint towards bearish 2025 but don't short yet!!
-No break confirms ascending channel but EOY will give one more opportunity for a break.

9) End of Year typical Tax Loss Harvesting, Santa Rally, etc.
-Unlikely to see a bullish breakout here
-If Continuation occurs, it will be Jan into Feb

10) Last chance for Bears!
-Need bearish breakdown to confirm both diamond and descending channel

11) Descension confirmation marks several opportunities on path down for bullish break outs
-Initial Support @ $4800 (20% drop from top)
-Secondary Support @ $4450 (25% drop from top)
-Massive Support @ $4144 (30% drop from top)

Best of luck in 2025 whatever you decide! Game on!

15 Sep

Nota

**Hover over numbered notes on chart to see analysis details step by step