Can the SPX Drop Another 200 Points Friday/Monday?

Volatility exploded starting in September 2018. The SPX crashed just over 20% in three months ending with what was to become known as the Christmas Crash.

On the Gann 49 month Panic Cycle later (7 squared) the market found a panic low in October 2022.

October 2022 is also 240 geometric months from the bear market bottom in October 2002.

So this was a big cycle in October.

As we know, October 13, 2022 marked a 50% retrace of the crash low in March 2020 to the all-time high in January 2022.

Markets seek equilibrium.

That alone was reason enough for a rally phase but in conjunction with the above two major cycles, a rally was almost a foregone conclusion.

Now we have another nearly irrevocable foregone conclusion:  a test of the 50% retrace from the October 13, 2022 low to the December 1^st peak.

That level is 3800.

As well there is an open gap at SPX 3818 from November 10^th.

That is the black ellipse on the following daily SPX.

IF the open gap is offset and Phil D Gap gets kneecapped, then the chart shows that there is a compelling convergence near 3675:

1) This 3675 region ties to a backtest of a declining blue Ghost Line connecting the August 16^th high and the November 1^st high.

2) It also corresponds to the high of the low bar day, October 13.

3) Importantly, it looks like we are now progressing in a powerful 3^rd of a 3^rd wave down. That would be consistent with a vicious waterfall. Already the SPX has lost 221 points in 3 days.

My interpretation of the Elliott Wave count is that large Wave 2 ended on August 16^th.

Wave 1 of large 3 down ended on October 13^th.

Wave 2 of large 3 ended on December 1^st.

You can see that the uptrend from the October 13^th  large range Key Reversal Day broke on December 6^th.

That is little Wave 1 down of large 3 down.
From there the SPX bounced from an interim trend line (purple) and Pinocchio’d a backtest of the green trend line.

That was little wave 2 of large wave 3 down.

The angle of the attack to the downside since then is consistent with a 3^rd of a 3^rd wave.

3818 looks like a foregone conclusion.

The question is on the last Triple Witch Opex of the year if the wheels completely come off with breakage below 3818.

Today squares 372 (3720).

With the notion of a “seasonal” Santa Claus Rally getting spanked, the hoped-for graceful exit for remaining tax selling could get squashed if we see accelerated momentum to the downside.

That’s what charts of major losers this year like PYPL, ROKU, and ABNB to mention a few look like-- money managers want them off their books; consequently, their potential basing patterns are imploding.

Drilling down to an hourly SPX shows Thursday’s Breakaway Gap and trend break.

The open gap at 3818 ties to a 50% retrace of the October-December range of 3800.

That should act as a magnet today.

Caveat Emptor, should  3818-3800 fail like support did on Friday, October 16^th, 1987, another Triple Witch, then a whoosh lower could play out.

In sum, in addition to 3670-80 being the high of the low bar day from October 13^th, and a potential backtest of a Ghost Line from the August high, 372 (3720) squares out with December 16^th.

At the top of this piece, I noted the 49 month and 240 month cycle (20 year) that perpetuated a bottom in October.

The October 2022 low is a major pivot.

IF the October 13^th low breaks, it opens the door to lower prices.

Keep in mind, after the October 2002 low, the market dropped into March 2003.

As well on the daily SPX above, note that a drop to the low of the high bar day could

Carve out the right shoulder of an inverse Head & Shoulders bottoming pattern.

Interestingly, December 21^st, is the 2 year (720 degrees) of the last Jupiter/Saturn conjunction,

A major Gann Cycle.

So whatever happens going into this window should tell us a lot about Mr. Market’s intentions

For the 1^st quarter of 2023.