The Final Reveal
Friday’s session was just a continuation of Thursday’s large daily bear engulfing candle. The overnight session made lower lows and when the day session opened the first hourly candle was a 1HR 20EMA rejection. This kept the train intact and accelerated into an 1HR 8EMA bear train very quickly. The bears didn’t stop until they made it to the 2000 target which was the next major support after 2022 was taken during the overnight.
A quick recap of what occurred this past week:
- Monday deadcat expected from the hourly extreme oversold “A+ Tier” setup, formed a bottom wick candle
- Tuesday continuation of the deadcat bounce marching towards the 2054 target
- Wednesday closed above all moving averages, treating this rally no longer as a deadcat bounce
- Thursday hit the trendline resistance and rolled over, daily closed as a massive bear engulfing candle that retraced all of Wednesday and half of Tuesday’s gains
What’s next?
Daily closed at 1994.75, this is
below 1998.50 which mean the daily double top setup came back to life. Bears
must break below 1983.25 to continue their assault and prove their momentum.
Remember, the 61.8% fib of the double target resides at 1932.68 and 100% measure
move at 1892.
The immediate targets are 1985
and 1970 (same as last weekend) from the bear train. However, the market is
facing a very complicated situation with the hourly extreme oversold signal
waiting to be confirmed vs. the on trend bear targets. Currently, our bias is
the white line projection followed by the red which has a 40-50 point deadcat
bounce in the works.
The main difference this time is
that the signal has not confirmed yet on Friday Dec 18th as opposed
to the December 11th initial confirmation followed by the December
14th morning confirmation.
The first two sessions of next
week will likely reveal to us the winner of this year’s final battle between
the bulls and bears. The winner decides the fate of the intermediate roadmap of
Santa Claus Rally or the daily Double Top.
The Hourly Extreme Oversold Signal “A+ Tier” setup
Last weekend’s projection worked
out well as the signal got invalidated below 1995 but confirmed itself again
during Monday’s session which led to a 50 point rally that extended into almost
80 points. This meant that the 40-50 point deadcat bounce target was fulfilled
easily.
Now, we have a similar situation
with the same support levels at 1995, 1985 and 1970. The signal will try to
confirm itself at those levels and give us a 40-50 fast and furious deadcat
bounce from the low. (Remember, we treat everything as deadcat bounces when
daily is below all moving averages.)
We will see if the signal confirm
during the Sunday night session and we have attached a projection chart similar
to last weekend’s report. The difference this time is that bears have a
slightly better chance at breaking down than last time because this is their 2nd
try.
Our executed win rate for the overall hourly extreme
oversold/overbought signals remains at 80%~ with over 200 trades across
multiple instruments since we started tracking it around 5 years ago.
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Fun fact: SPX cash index needs
above 2058.90 to become a green year.
