The big 161 extension of March 2020

The triggering of the most reliable crash indicator I know of.

When you look at historic crashes, you’ll find an amazing of amount of them have tops that first dummy crash somewhere in the 20 - 30% range, make a big spike high that ends somewhere in the 161 - 220 fib range and then starts to very clearly crash upon the next big breaking of the 161 fibs.

I’ve got examples, and we’ll get to that. Firstly I want to say as someone who’s both incorrectly and correctly shorted into where I believed a mega trend was ending, I’ve become cautious of this move to the point of paranoid. I’ve learned whenever I’m in a great short up 20 - 30% I want to think about risk of being squeezed.

The posting history here looks flawless bear. Showed up in late December with a forecast of a big high coming in indices. Added some conditions for a legit break being made when we were down a bit, and went into a flurry of activity recently as I think the break may have already been made and we’re just grabbing liquidity.

This is set up just to track the bear thesis. If you follow me elsewhere you’ll know I’ve spoken extensively with detailed trade plans about the short squeeze risk. A parabolic new high. I’ve been long multiple times over the last months. Been a lot of good trades long. Just none of them have produced follow through at this time.

I’m saying this because I think the 161 signal is compelling. Something that I think makes a really strong case for a big crash being imminent. I want to make sure people understand while I am fully positioned for this right now, I have a lot of bullish contingency plans. If this signal fails - faces shall be ripped.

Bear Stuff

I looked at a lot of crashes. It started with the currency markets doing research for what I thought would be a mega trade setting up in Sterling due to the Brexit event in 2015. This produced a 30% overnight move (Which is INSANE for a currency pair). The models I had from a previous GBP crash worked incredibly well.

After the 30% move I became fascinated with two big GBPJPY crashes and how they seemed to have a lot of match up in the ratios of the swings. I was studying this thinking another big Sterling crash was coming after the Brexit one. This never came, but it was never invalidated, I still wait.

It was in these GBPJPY crashes I noticed the 161 topping swings for the first time.

I was just a Forex trader at this point. Some time later I had a look at the SPX chart and noticed the 2000 - 2008 moves were quite similar to the GBPJPY chart (Which I’d studied for 100s of hours and to this day have a snap-shot image in my head of). Noticed a lot of things about this, but here’s the 161s.

This was when I became super interested in studying SPX crashes. I could see that if I’d been watching the SPX move setting up in 2008 with all the things I felt like I “Knew” from the GBPJPY study, I’d have gotten some trades! Not only shorting highs but generating great target and re-entry levels.

I knew it would probably be inevitable there was another big market crash in my life and I became determined to know how to understand when I was seeing one, how to short high in it and how to target efficiently. So I started looking at lots of big asset crashes.

Starting with DJI, 1929 - here was the 161 top.

This DJI chart blew my mind, because I felt like the things I “Knew” from other studied would have clearly caught all of the important swings on this. In real time the signals could have been generated and many would have been successful. I wasn’t curve-fitting. I knew I’d have really spotted that. I noticed parts I’d lose too.

Turns out this 161 topping thing is older that the 1929 because it also happened in 1915 and 1920

This whole thing looks a lot like 2000 - 2008. Read more about that below.

Different ages with similar crashes

Now, this 1915 - 1920 model looks like it’d have helped trade 2000 - 2008 in SPX and also the two big GBPJPY crashes. Which is fascinating. And something that made me really want to zone in on learning the crash signals. Because I’m looking at four different moves which are each lifechanging trades - And surely more will come.

I could not find many tops I would have missed with my 161 signal, but I found a lot I would have nailed.

And then … in 2018, IT HAPPENED. I seen a mega sell-off in SPX. It went into a rally and I had a 161 I could draw. And then the market extended to the 127 fib (Which is not as far as the 161!) and then it crashed. And I was very, very sad. I simply could not believe it. Overshoots of 161 were norms, why did I get the one undershoot?

Then I did what anyone would do, revenge shorted the low and took a smack in the teeth in the start of the 2019 rally. The model failure levels helped me a lot in missing out the bulk of the rally. But I did go short for the first time right into the low. First really big SPX short trade I took, I must have been the bottom tick.

Caught a few bear trades in 2019 based on just basic momentum. Did okay but went in big at the wrong time and had to rapidly retreat and felt burned. The model failed.

So much for hard work, eh.

But then 2019 started to look super bubbly. And we were running over the last highs. Once we’d broken the previous highs, I knew I could draw my fib and have another 161 extension. Dummy crashes coming in a little range like 2018 - 2019 was also a thing I’d seen. I’d maybe just been suckered.

Here’s where the 161 fib of the 2019 drop came in.

You already know I took it in the teeth starting to short at the 127 fib!

But then it happened. Everything I’d worked for - And was starting to wonder if I’d been crazy to do so, we’re talking a lot of hours - came off. March 2020’s high was a 161. In the days before the drop came I knew I was getting big bear signals. I put on my big trades.

In the days before the March 2020 crash would start, I made this forecast of a 30% drop. Lifetime trade. Absolutely sensational. The models had top to bottomed it. I was wrong about the no new high (And we’ll get to that soon), but I didn’t short this low … I took profit and did really well in the early bull market.

It was charting beauty.

And it was real world horror. It was not a nice feeling to think I was profiting from people losing money as it was, and the news was … not good. I knew there’d be news. All the 161 tops had news. All of them. I just didn’t think about what it’d be like really experiencing the news, and obviously I didn’t think it’d be a pandemic.

2020 I made a big effort to warn about what a crash setup would look like. Defined the levels as per the models where it should come from. Spoke about crash trade plans and strategy for most of the year but had about three or four main short zones. I felt very confident the model would work, but it didn’t.

Buying all the failures of the bear patterns worked out pretty well (Learned about this in 2019). And when SPX broke the high I packed up the bear warning and I said market’s probably a bull until at least 3800 or so.

Guess where 3800 or so was … 127 fib, of course.

And here we are again, into the big decision zone. Been in this decision zone for close to a year, and we might be breaking under it.

Had the 161 level on the radar for a year. https://www.reddit.com/r/BeatTheBear/comments/noh9al/lets_look_at_these_big_indices_161s/

Have been saying a breaking under it triggers big move since October. https://www.tradingview.com/chart/SPX/MzCgCS55-SPX-big-161-fib-level-inflection-point/

Forecast Specific price action to look for around it in Feb (Also bought into the capitulation short-term selling here on the news of the Russia invasion).

Pretty accurately forecast low to high in the rally with this (And we also caught/posted long trades that hit trailing stops around 3600).

And all of this has been done with assumptions the models will play out and also fine tuned with some of the things I’ve learned from trading various crashes (We hit a LOT of them in the small caps and crypto in 2021). The models have worked extremely well with us being to define a long-time ago our max expected high.

I spoke a lot about the short op into the 4700 - 4800 area. Caught pretty much the absolute high on the DJI, with a perfect expression of the 161 top.

Pointed out the breaking of the 161 of a full world stock market tracker.

Based on all of this, here’s the implied forecast for the next break swing.

I think if this swing happens the market will not make a new high without trading at least 50% off the high, but this sort of area is probably where we’d get a big rally and a chance to re-position for shorts (Maybe at prices as good as they are today, in the 4000 area).

Positioning swing short