Next week is a holiday-shortened week, with Thanksgiving reducing the week ahead to 2 or 3 real trading days, at most. However, the rest of the world is open for business as usual with the underlying structure of our equity markets about as clear as it gets: A series of 1st and 2nd waves working as a prelude to a massive third wave decline. When it comes, whether next week or next month, we don't want to miss it. CHART PATTERNS In past weeks I have highlighted the DJI, SPX/SPY, IWM and QQQ as all in lockstep, making intermediate term tops and most recently a series of first and second waves, ominously threatening a third wave down at multiple degrees of trend. Last week was a near perfect example of the same pattern appearing across the spectrum of indices. I promised, "Short & Sweet," so this weekend let's simplify the analysis by focusing on the Nasdaq, which stands out as the most vulnerable of the indices. QQQ Daily QQQ 2 Hour A slight tweak on the targets for the initial leg down, now targeting 560-480 and extending the time frame into January options expiration. More importantly, when will we see it begin? Trick question - It already has, as of early November. The Q's have fallen from 637 (Oct 29) to 580 (Nov 21) in a highly volatile manner, setting up the index for a deep dive Wave 3 in the days-to-weeks ahead. As you can see with our option selections below, we are covered for such a move into the third week of January. It would take a move back into the recently broken parallel channel, about 610-615, to temper (although not eliminate) my bearishness. Trio Of Shorts - Premium Service The gains shown above are well off their best levels, but with plenty of time still left in both December and January expirations, I fully expect new highs across the board sooner or later in all three positions. Any further rally next week would be an opportunity to add, with January expiration my preferred bet based on the newly established downside targets. At QQQ 500, those January 16th 550 puts are worth $50 each, close to 8X initial investment. I wouldn't want to miss that return by not giving this pattern enough time to unfold. Let's leave the stop at break-even (5.90) for now, meaning zero risk and 8X reward. My kind of bet. BTC As for Bitcoin, the two targets of $75K to $50K are still viable, as well as a fifth wave Fibonacci extension target of about $60K shown above. Next leg down will decimate the Bitcoin bulls and will likely be the catalyst for a Nasdaq mini-crash as well. Bottom Line The equity markets are in the early stages of an Elliott Wave third wave decline, with the worst of it just ahead, either starting now or in the days following Thanksgiving. Active Trades PRO Service Premium Service
