I’ve been charting this for six days.

A couple of months ago, I’d said that I was bullish in the short term and bearish in the long term…

In other words, I’ve been moving to an even greater cash position while playing the short side and keeping the vast majority of my long trades limited in terms of holding time.

But please, don’t confuse me with being some sort of doomsayer…

Like most traders and portfolio managers, I’m looking at the charts and internals to decide positioning — even if it means bending my own rules.

We all have (or should have) our own parameters for risk, one that’s built on time frames, technicals, and gut… But no matter how long your rules have served you, there will come a time where the environment changes…

(Source: tenor.com)

We’re going to focus on the weekly charts while everyone settles into what was likely a day of short covering yesterday…

Now, above is about a ten year span between the Dotcom Bubble and the Financial Crisis.

Essentially, this was a decade-long range trade with harsh downside and the occasional fledgling burst higher.

But what I want you to note is the pattern of the ’08 crash and the bearish moving average crossovers… the Death Cross.

(50sma crosses down over the 200sma.)

Now that we’ve got a refresher on two of the worst crashes, this is a look at where the SPY finished last week. Again, we’re looking at weekly charts…

Using a Regression Channel, I’ve taken advantage of the ease at which we can visualize where the market has gone “out of bounds”.

Clearly, the Covid Crash and its subsequent V-bounce mark two of these events…

I’ve also got Chris Hood’s TRADECOMMAND tools in action because they’re exceptionally accurate and far more predictive than anything I’ve ever added to a chart.

(Click here to learn more.)

To keep it simple, when looking to the lower chart, you can see where the redness from the downturn took a handful of weeks off, but just flipped back to red again…

And remember those wonderful ATR-based channels from last week? Those are on the chart as well to tell us when things are getting sticky.

Yeah, they’ve been sticky for just about the entire year…

But here’s the big question: What’s next??

I have no crystal ball. However, we can apply an analog of more recent moves downward in the SPY, particularly ones that look awfully similar…

…what’s meant by “awfully” I’ll leave up to you.

Let’s get a little closer.

In applying the analog, I’ve labeled the current bar pattern in white and where this may eventually end up in red by looking at the tail end of the Financial Crisis.

These candles aren’t an exact scale, of course.

I’ve added in neon green trendlines with arrows from the highs along with a dotted version to make sense of the even more abrupt change downward.

I’ve also extended Fibonacci Fans from the bottom of the Financial Crisis and a standard Fibonacci Retracement from the Covid Crash… less emphasis on the latter.

(*Note – Oddly enough, the fan lines coincide with the retracement in a way I hadn’t anticipated, further validating their use.)

As it sits, we’re halfway down and resting just above the 50% level from the pandemic and still a ways to go towards the 38.2% mark on the Fibonacci Fans.

If — if this pattern plays out, it would be a setup for an end of year rally prior to an eventual drop that most investors will not be prepared for.

You see, what’s not pictured is the end of the downward trendline projection which points to the ~$160.00-$170.00 levels… that is the doomsday scenario.

My thought is this: If or when this plays out, the SPY must hold the 61.8% mark (circled in white).

The SPY has briskly fallen downward due to a combination of economics and geopolitics, but remember that the economy and market aren’t the same. They sort of chase each other’s tails.

The unfortunate part is that extreme debt and warfare around the globe have precipitated incredible falls… And being that your average listed company is spending lesser time on the market (thanks to Wall Street), “buy-and-hold” will need some adjusting.

Nonetheless, I hate making predictions…

Stay vigilant and trade the charts.