Last week, I stated my preference for a regular flat as the second downside pattern in this large fourth wave. There was an alternative of another pattern, such as a zigzag down to a new low, but it was less probable.

Although it took all week, we got a first wave down in 5 waves, which is the typical first wave of the C wave of a regular flat. After a second wave retrace, which should be complete by about Tuesday or Wednesday this week, expect the balance of the C wave to drop to a new low.

It should look something like this (about 2 mins in length):

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Bambi Meets Godzilla was a 1969 short student clip that gained notoriety the same year as the famous Woodstock festival, which was a point of a major third wave top in the market, as well as a solar maximum. It was Vietnam War time and there were violent clashes beginning against the establishment. This was just the tip of the iceberg, though, at the climate turned colder and dryer and we headed into a five year recession, culminating in Nixon’s impeachment. My video on this market and climate is here.

This is a similar point in time to today, albeit a much smaller cycle top to what we’re experiencing now.

My point in running this video is that there will be some complacency this week as the market appears to rise only to have the second shoe drop in a much bigger drop to a new low. That should shake things up!

Then we’ll turn around and head for the final all time high.

Pontificating Pundits

They were out in force on Thursday, proclaiming a 400 point DOW drop was the result of Trump’s declaration of a trade war. Never mind that the DOW had dropped 1300 points over the week before the trade war declaration (I guess it wasn’t convenient to point that out). And then on Friday, we rallied to almost completely wipe out that 400 week drop.

I can’t wait to see the grandstanding once we have what looks like a 2000 point drop in the DOW over the next ten days, or so!

Events, of course, don’t affect the market.

The Balance of the Regular Flat

The pattern tracing out in ES, NQ, the Nasdaq, and the SP500 seems to me to be a regular flat. Here’s an description of the traits of a flat (from the Elliott Wave Principle):

“A flat correction usually retraces less of the proceeding impulse waves than does a zigzag. It tends to occur when the larger trend is strong, so it virtually always precedes or follows an extension. The more powerful the underlying trend, the briefer the flat tends to be. Within an impulse, the fourth way frequently sports of flat while the second wave rarely does.”

In both ES, NQ, the Nasdaq, and SP500 (and other US indices), the preceding wave up was an extended wave, so the fit here is quite good.

Above is a chart showing a very simple drawing of a regular flat. Think about the large fourth wave in ES that we’ve been tracing out since January 29. The BULL Market wave on the left in the chart relates to the pattern we have unfolding.

The first set of waves down from the 2875 area was in three waves (a zigzag). This is the A wave of the flat.

The wave up from about 2530 is also in three waves. This is the B wave of the flat (a 3-3-5 pattern). We’re now in the C wave which should trace out the five wave pattern of the flat (to the downside).

We now have the first wave down of the five wave pattern we’re expecting for the C wave of the flat, and are working on the second wave now.

Chart Show Changes

I’ve moved the Chart Show back to Wednesdays, but moved it until after the market closes. On fast moving days like we had on Thursday this week, it’s difficult to keep charts up-to-date during the day. Once the market closes, it’s much quieter. Market closes are very important and this new timing will allow you to plan for the coming day rather than have to contend with fast moves in the last few hours of the day that may impact the calls during the show. It will now be on Wednesdays at 5PM EST.

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The Market This Week

Here's the latest daily chart of ES (emini futures)

Above is the daily chart of ES (click to enlarge, as with any of my charts).

The expected regular flat has been pretty much confirmed with what appears to be a first wave down (in 5 waves) this week. On Friday, we had the expected turn up in what should be a second wave to around the 62% retrace level.

Expect a turn  down this coming week into the balance of the C wave to a new low. I'll go with a rough target of 2420 on the downside, although the C wave down can end anywhere after at least tracing out a wave similar in length to that of the first ABC wave down.

The large ABC wave down took about 10 days to fully develop, the subsequent rally took eleven days, so I'd be expecting this entire C wave down to drop in a similar timeframe.

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