We’re right at the top of the danger zone on the S&P 500, and the setup here is about as risky as it gets. I’ve seen this same structure before — move down, move up, then bleed off. It’s the exact kind of pattern that’s preceded major market crashes in the past…
I’m talking 1987, COVID, the housing crisis — it’s all there in the chart.
We just pushed right through the 78.6% Fibonacci retracement, which has been a nasty reversal point on dozens of charts recently. Now the question is whether this next pullback is a three-wave correction or a five-wave move.
If it’s five waves down and we only bounce three waves up, that’s the kind of setup that leads to a full crash. Not just a dip — a meltdown.
How a Bounce Sets the Trap
Here’s what I’m watching: If we get a five-wave drop, then a weak three-wave rally that stalls at a 61.8% Fibonacci retrace, the next leg could be brutal. That’s the exact structure I look for when identifying crash patterns.
And that’s exactly what this looks like right now.
I’ve mapped it out — the previous pullback already had an outsized move higher. We’re now stretched, sitting just above key Fib levels, and the risk is enormous.
The next correction will tell the story. If it’s a clean three-wave, maybe we avoid the flush. But if this thing breaks down in five, we’ve got a setup for a monster downside move — possibly under 4,000 on the S&P 500.
You can doubt the comparison to 1987 all you want, but go look at the charts. It’s uncanny. We even did that double-bottom fakeout, just like back then.
This is a textbook setup — and dangerous.
Crash Pattern or Melt-up?
Now, there is a path to new highs — but it’s not the one we’re currently on. The only bullish scenario I see is a three-wave correction that holds, followed by a five-wave rally to a new all-time high. That’s the preferred path. But I’m not betting on it yet.
The S&P 500 has a crash pattern forming. Russell 2000 (IWM) looks even worse. Tech stocks are flashing warning lights. Nearly everything I looked at Monday morning is pushing into resistance.
The potential for a pop and drop — hard — is high.
This isn’t about the why. Everyone wants a narrative. But this is a chart thing — not a news thing. I don’t care what the story is. I care about the structure. And the structure right now screams caution.
Be careful out there. The account you save might be your own.
Jeffry Turnmire
Jeffry Turnmire Trading
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