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Monday, October 26, 2015

Ready Set Crash - Market update 10/26/2015

Preparing for the next Market Crash
As bullish investors write off the August crash, and look (backwards) to earnings, and forwards to Wed's Fed meeting, and high risk tech stocks, to salvage the bear market rally of the past few years, it's time for us to mentally prepare for the next leg down in what I now see as a continuing bear market. If you were under the mistaken impression that we are in a bull market, The chart below represents the ongoing corrective pattern (bear market) of the past 15 years, and primary wave E's are nothing to play chicken with.
If you recall back in August; I was looking for a capitulation top in a broadening top pattern to take out the previous high set in July, as traders began to return from summer vacation, and put money to work, but then no sooner than I publically called out that trade, the market collapsed.
Technically the August flash-crash was the result of "truncated wave 5", followed by the long awaited return of the great bear market, but I think the timing was no coincidence, and as I've said and documented in the past "we are being watched", and I'm sure even more so now that I have over 900 Twitter followers. Well,  "fool me once shame on you; fool me twice shame on me!" Or as The Who said in 1971, "We Won't Get Fooled Again"
We see the same EW count on the NASDAQ (on the chart below) in wave 3, which should confirm that the "August swoon" was in fact only the beginning of a much bigger crash. That reversal could take place at any time, but knowing thus market as I do, we probably won't see it until a little relief rally upon release of the next Fed statement on Wed.
Timing is difficult to predict, but because all wave 3's tend to be devastating, and this is where the money is made (on the short side), I'm prepared to wait as long as it takes; remaining short into weekends as I did this last Friday, and even into this weeks The Fed announcement. 
As far as timing the duration of wave 3, I believe it could last several weeks. Liquidity tends to unwind faster than anyone can predict, so we have to be prepared for the worst. Stay short, and try not to catch any falling knives.
I see firm support at the $SPX 1550 - 1575 level, and at least a trade-able rally there, and volatility typically wanes going into the holidays,
so I'm thinking Thanksgiving.

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