2/18/2023

MPW Bamboo Scroll #55 (2/18)213

Below is the short-term 30-min chart & roadmap:

Below is the daily chart for SPX:

• 4195 “should” have ENDED the LARGE W-2 rebound: (1) though a bit awkward-looking, the
decline from 4195 to 4060 can be counted as a leading diagonal, with 5 zigzag waves woven
together. (2) Friday’s gap-down is significant, as it effectively broke through two trendlines
which gives rise the potential W-3 has started. However, bears still need to conquer the
bear-market trendline—the purple one on the daily chart—to seal the deal. That zone
coincides with DMA(200)= 3950. (3) expect a big battle if it gets there. Orange Roadmap on
the daily chart is the primary path now, while the gray path is the alternate count.

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What happened?

• In the mid-week update posted on Feb. 15th, I included this pattern of SPY’s daily chart,
indicating that SPY/SPX is “very close”—if it hasn’t already done so—to the final top of
W-2 rebound, repeating the rebound pattern of this bear market for the third time.

• Here is an update of this chart two days after.

• SPX/SPY gap-downed two days in a row after the first chart; more importantly, contrast
with the previous gaps, the market failed to fill them by the end of day—normally a
character of a new bearish trend (see the circled zone and the hand-pointer).
• The LARGEST OpEx position and a long weekend complicated the picture a bit on Friday.
If you compare the previous cases when the major bearish leg started: IT ALWAYS
STARTED VERY SLOWLY, THEN SUDDENLY SHUT THE DOOR WITH A GIANT RED BAR.

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SO, What IS NEXT?

• I have no doubt in my mind that the Big Crash Wave-3 will come in the first half of
2023. If it hasn’t started from 4195, then it is not far from current position both in
time and in price. Now, given the overall wave structure and cycle, I lean toward that
W-3, or more precisely, the w(1) of W-3, may have already started from 4195.
• See the 5-min chart below for a detailed illustration.

• The above 5-min chart is a close-up look of the tangled waves from 4195 and how I
count them. Basically, I saw them as a bear nest, with a decisive 3rd of 3rd of 3rd BIG RED
BAR to emerge sometime next week to break both the lower purple trendline and touch
3950 zone.
• A bear nest is multiple w-1 & w-2 waves at different levels strung together, waiting for a
binary event to unleash its compressed power in the form of a 3 rd of 3rd of 3rd wave.
Most of the time, the 3rd of 3rd of 3rd wave presents itself as the largest candle bar on
the daily chart—AND, the gap on that day won’t be filled for a long time.
• So, from 4195 to 4060, that leading diagonal would be the Black W-1. A rebound to
4160 is the Black W-2. A diagonal most likely is retraced to 78.6% level and to its fourth
wave. In this case, SPX bounced back to 4160, almost 78.6% of W-1. Then, a lower level
blue w(1) hit 4095, w(2) rebounded back to 4148. Thursday’s gap down is another lower
level w[1]—marked in light orange color on the chart. Notice that w[3]=4136-4049, a 87
point decline, exactly 1.618 times of w[1]=4148-4091. Also noteworthy is that Friday’s
w[4] flat wave retraced exactly 38.2% of w[3]—see where the hand is pointing at.
• The only thing that argues against a bear nest formation is that it lacks a decisive BIG
RED bar so far to mark the middle of a giant third wave. If it doesn’t come next Tuesday
or Wednesday, then this bearish count is probably wrong and the alternate count is
still possible.

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TEACT MODEL EDUCATIONAL CENTER
• Bull-nest vs. Bear-nest

The concepts of “bull-nest” and “bear-nest” were not mentioned or discussed in the
original writings of the Elliott Wave Principle. However, its relevance and significance in real-
life trading cannot be underestimated, esp. given its extremely elusive and deceptive nature.
----------- MPW
If you Google “bear nest”, this is what you get:

Yeah, a bear in birds’ nest. That shows how little coverage this subject has received on
the Internet. Yet, this topic is hugely important, especially given the appearance of a bull-nest
or a bear-nest always coincides with the most pivotal juncture of a stock market turning point.
Most often, a wrong decision near the bull-nest or bear-nest would immediately put you in an
ugly and almost irreparable position.
Why? Because to build up a bull-nest or a bear-nest, the market needs to deceive the
majority of the traders before a vertical move. Normally, when we see a melt-up or melt-down
type of situation, you can easily identify a bull-nest or a bear-nest before that ignition.
However, less than half of the times, a “bull-nest” or “bear-nest” failed at the ignition point,
turning into a diagonal, and immediately getting back toward the origin of the nest root.

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Let me show you some real-life examples of the bull-nest or bear-nest and its monstrous
power afterwards. On May 24th, 2022, I tweeted this alert in mid-session: “Potential Bull-nest,
as the current format stands, there is a legit read that SPX is building a Giant BULL-NEST—
with potential upward target of 4080; it is always the most dangerous zone here. Careful.”
While I was tweeting out this warning, SPX traded around 3920. So, basically, I was seeing a 4%
sharp move in the direction that was opposite of my original count. Yes, the GREEN ARROW
pointed in the direction of this Bull-nest if it were to unfold.

The following chart documented what happened afterwards. Pay attention that this
chart is a 30-min chart, so the candle bar is a bit different from the 5-min bar chart above. In
three days, by the end of May 27th, SPX jumped over 250 points (6.5%) in a vertical move (see
the yellow-shaded zone on the chart).

Literally, there is no retrace or consolidation during the move after the bull-nest. As a
bull, if you missed the boarding zone, it is hard to chase the train. Similarly, if you were a bear
and didn’t get off the rocket on time, your account would be wrecked for sure.
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A bear/bull nest refers to a series of w-1 & w-2 waves at different levels strung together,
waiting for a binary event to unleash its compressed power in the form of a 3 rd of 3rd of 3rd
wave. Most of the time, the 3rd of 3rd of 3rd wave presents itself as the largest candle bar on the
daily chart—AND, normally, the gap on that day won’t be filled for a long time.

As the chart above illustrates, for a bear nest formation, you can see a series of lower
lows and lower highs, with each downward move getting compressed and smaller than the
previous one. It looks just like a wedge—but there is a major difference. For a wedge, or a
“diagonal” in the EWT terminology, the main moves are always zigzags or corrective waves;
however, for a bull or bear nest, the dominant moves must be impulsive, which means they
should be a five-wave series in themselves. The chart below shows the diagonal formation.

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The dilemma here is that (1) near the end of a bull/bear-nest OR a wedge/diagonal, the
technical indicators OFTEN give you a similar reading; (2) The small waves of a potential
bull/bear nest OFTEN can be counted EITHER as corrective OR as impulsive waves. Therefore,
unless you are 100% sure about the direction of the potential move, it is better to hedge near
the tipping point of a bull/bear nest, namely, the potential 3rd of 3rd of 3rd wave. At the close on
Friday, the market is sitting in such a contradictory position. Simply put, if SPX doesn’t have a
large red bar next Tuesday when market resumes, then the bear-nest read is most likely wrong.

[Due to some family emergencies, I must fly back to Beijing, China this afternoon and stay
there for 3 days. So, I would be on a flight back Wednesday the whole day. Given this tough &
tight schedule, I have to skip the mid-week update for next week. Thanks for your
consideration in advance.]

MPW
February 18th, 2023

Disclaimer: all these writings by MasterPandaWu (MPW) about the stock market analysis and the TEACT
prediction model are for educational purposes only. Any of the statement or writings here are not for
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