Another Catalyst Sunday morning: The Plot Thickens "WILMINGTON, Del. (AP) — Treasury Secretary Janet Yellen said Sunday that the federal government would not bail out Silicon Valley Bank but is working to help depositors who are concerned about their money" The Silicon Valley Bank crisis is all over the financial press this weekend and it will undoubtedly affect Monday's Open. The analysis that follows assumes that best case a temporary resolution will propel another Wave 2 rally, while worst case suggests contagion-induced deepening of the crisis leads to a volatile black Monday. Most likely case is somewhere in-between. For our purposes we are looking to where the indices will be 4-6 weeks down the road and that has less to do with a temporary fix to a failed bank and more to do with other shoes that are about to drop. No one expected this latest leg down to be ignited by the second largest bank failure in history. Whatever will bring the trading halts when they come will come on the heels of yet another unidentified catalyst. The one constant? The market trend and impulsive nature of the turn down across all of the major indices. What was sideways to up since last fall (see EWI chart below) has turned hard down and the worst of it lays still ahead. At the bottom of this Weekend Update are some VIX Call returns that are staggering. Please consider at least a small bet that way in the days ahead. Guest chart from Elliott Wave International Free Pass For A Changed World - Sample 10 Days of intense EW The Big Picture What comes next is Crash Wave 3, a turn of phrase I came across after Friday's close while watching someone describe the price action he expects for the rest of this month. I have been labeling it a third wave down at multiple degrees of trend, or said another way, a Wave (iii) of 3 of (3) Down that will simply put, change everything. However it may be best described, it carries with it the risk of being much worse than expected, of closing market sessions mid stream, via multiple trading halts, some of which could just close the whole shebang down one, two or three days in a row. I want everyone reading these words to be ready JUST IN CASE it gets this bad and loaded up with puts or not, hope that it doesn't get that bad because whatever is left smoldering in the rubble come April or May has to feed the TSLA bulls to $1,000 by January 2025, so let's be careful exactly what we ask for...as though asking has ever had anything to do with it. Our EW pattern recognition has been spot on in setting up last week's decline, but it took two months longer than we anticipated, In the option tables you will find some March 17th ETF puts that were bought back in January but that still are carrying value a week before expiration. With the best of the bear still to come, puts bought now, whether expiring in April, May or June, have huge potential. This is the, "Wave 3's are a wonder to behold" part of EW analysis, in real time, with real money and with carefully crafted trade management. DJI Fibonacci retracement window allows for 500 point moves against the major trend down before reversing, but then allows for 3000 pt legs lower at the drop of another bank or real estate investment trust. Any counter-trend rally into the 50% to 62% retracements should be sold and sold heavily (i.e., buy more puts). SPY SPY should drop like a rock and be closer to 300 than 400 this time next week, however allow however for it to take several weeks, making April 21st expiration the goal for 500% and better returns. As set out above in the DJI comment, it won't necessarily be a straight line drop, so use the indicated Fib retracement window to add to positions if retracement rallies occur to 50-62% Fib levels. I'll be monitoring during the week and post Special Intraday Alerts as necessary. QQQ QQQ target's 200 by April-May-Jun which should make up for lost ground over a robust YTD rally into last week. The strategy here will be to double-triple-quadruple each of three successive monthly expirations, banking profits after each round. Best bet for new money puts: IWM So far IWM hasn't flinched in leading the way down. Expect QQQ to challenge for downside momentum in the weeks ahead and may be the best bang for the buck bet for new money puts. IYR I still consider IYR the source of cheap puts, even with the midst of its triple 3's down. Banks going under is not good for real estate. VIX Triple digit VIX coming (whole number-not percentage) - you read it here first. Best bet for new money VIX calls: On March 5th the VIX Mar 22nd $25C traded as lows as $0.23. Yesterday it traded as high as $4.15. Going forward aggressive new money will be added to VIX calls for each monthly expiration until either we get the total market collapse forecast by EW analysis, or, the market nullifies this worst case scenario and in which case we will find another leveraged option bet with 10-20X potential on a month-to-month side bet. VIX Mar 22nd $25C TSLA Price has entered its Fib Retracement Zone between 175-150. Next step is to monitor for indications that Wave 3 UP is taking control and it could be days, weeks or months away. Price movement will let us know when its time. Remember how hated this stock was in early January under $110, it should be hated just as much at the end of Wave (2).
