The Big Picture Starting off this weekend with a 25 year chart of the DJI that tries to put the potential threat to the stock market in a strategic perspective. Note that even smallest 38.2% of Fibonacci retracements of the run up from the last real bear market (2008) takes the DJI down another 20% from current levels, to about 25,000. A 61.8% retracement takes the Dow to 18,000. The next major low being between 18,000 and 25,000 is consistent with the Elliott Wave patterns, Fibonacci ratios and macro economic mayhem; and THAT is The Big Picture. I've labeled the Jan 2022 High as a "Multi-Year-Decades Top" because just how important a high it turns out to be is unknown right now and we may not know for years. I've also selected an "area chart," because damn if the past week doesn't look like a cliff and the Dow is about to fall off of it. That would suggest a decline of magnitude consistent with a black swan event, apart from all of the traditional bearish patterns coming off of YTD price action. The market is vulnerable for something big, at a time when "something big" likes to happen, i.e., Sep-Oct. This ominous seasonality will be with us for another 5-6 weeks. QQQ The chart analysis shorter-term is reflected in the QQQ chart below and remains pretty much the same as it has been all summer, the unfolding of an Elliott Wave impulse pattern leading into a Wave 3 of (3) deep dive that we have been expecting. Anyone else hearing a knock on the door? The EW pattern above projects the Q's dropping about 15% into October monthly expiration on Oct 21st. That is a realistic extrapolation and it supports the holding of Oct 21st QQQ Puts (as well as IWM, SPY and IYR Puts) tightly over the next few weeks. UVXY The biggest disappointment so far, and therefore the strategy that may have the most massive upside, is volatility and in particular UVXY calls. As I pointed out to the PRO group on Friday, during the Covid Crash UVXY was up 13 fold in a month. A similar spike now would send it from $10 to $130...and assorted strike calls up exponentially alongside. Both Blue Line PRO and Blue Line Premium services are in the UVXY Oct 21st $10C for starters, with more aggressive minded traders, with an appreciation for the Covid Crash chart above, also adding Oct 21st $15 and/or $20C along the way. If Wave 3 of (3) unfolds by Oct 21st, UVXY should be well above $40.....and maybe twice that. How long it can stay up there is another issue and we will wait to cross that bridge when we come to it. SPX Hourly One last chart to think about on Monday-Tuesday: SPX Hourly. Note how on Friday it appears that Wave 3 of (3) started down by breaking below the trendline up from the Jun Wave 1 low. Price did not follow-through into the close on Friday, turning up ever so slightly by bouncing off of the blue dotted mid-channel line: If price returns to "kiss" the underside of that just broken red lower trendline, consider it a gift from the trading Gods, or another smaller Wave 2 rally, before price really melts down and in a hurry. Those UVXY calls will be an even bigger bargain...but not for long. Sept 16th Expirations: Index Options A mixed bag to report as these three positions went off the board on Friday. Mixed only insofar as we had higher hopes, but Wave 3 of (3) has pushed itself out to the Oct 21st expiration, so the gains of +231% (IWM), 53% (IYR) and a loss of 55% (UVXY) are good enough for a prelude to the real decline ahead. IWM went off near the top if its range for the month since entry, a clue that momentum is building for the best trade of 2022 still to come. Housekeeping: Posted Alerts & Email Schedule New Alerts can go up on the web site at any time, but as a general rule if there is going to be a fresh Update/Alert on any given day in either Service it is posted about an hour before the scheduled email delivery times of Noon ET for PRO Service and 3:00 PM ET for Premium Service. Always read through the email even if you have already read the posted Alert because last minute edits and chart updates are often made just before the emails go out.
