Fridays drop was a nasty one, but still a very controlled decline. It almost hit the rising white trendline, which was around 7510 on the ES that day. The final low though is still not here yet. As we go into the elections tomorrow we have to be prepared for something crazy happening.
I mean we have to be open for a repeat of the 2016 flash crash repeating. I'm not saying it's going to happen, but it could. Up until last Friday the market has held support throughout the entire month of October, as it's traded in a tight 200 or so point range. That expanded to about a 300 point range with the Friday drop.
But... I feel like it's going to take some kind of shock event to cause a large drop, and something related to the election could be the catalyst? However there's no way to predict that in advance. I can only say that a low should happen next week and that the odds of the low being in already on the 30th is slim.
Let's look at the main wave count...
First, let me say that I'm going to ignore that spike up at the close on Wednesday as that was clearly done to hit the stops on the shorts that placed them slightly above the 10/21 prior high. On the SPX cash (and SPY) there's still a lower high on Wednesday then the 10/21 high, so to me the wave count is still hasn't changed and is therefore still valid.
The rally up into Wednesdays close was a wave 2 (call it a small wave), and that's still inside a wave C down (call it a medium wave). Going into next Tuesday should be a small wave 3, 4 and 5 to complete medium C down, which then completes large wave 4 down. Following that will be large wave 5 up into early January to finally hit the 787.13 FP on the SPY.
Back to the short term though... which from the high on Wednesday the small wave 2 up finished and then Thursday started the small wave 3 down, inside medium wave C, but it's clearly subdividing into 5 tiny waves. On Thursday it appears we had tiny wave 1 down early on, and a tiny wave 2 up into the close, inside small wave 3.
Then after the close the market dropped quickly and continued of course all day on Friday until around 3pm EST when it put in the low for that move. I can count 5 tiny waves down, which with this main wave count I've been tracking that leaves a bounce for small wave 4 Sunday and Monday, and after the election results the last drop for small wave 5 happens, and that ends medium wave C and large wave 4... correction finished.
But what if something crazy happens? Here's the wildcard chart...
If this wave count actually sets up I think something negative will happen over the weekend to blame to coming drop on, but I don't know what that will be? My point here is that this market is not ready yet for a rally up that will stick and start a trend move. There's one more drop coming into next week, and with this wave setup it could be a deep one (a flash crash) that goes below the 7400-7500 area that I've been looking for on my main wave count as the low.
And quite frankly, I think there's needs to be a scary drop happen so that the market will have the fuel needed to rally up into the end of the year to hit the FP on the SPY of 787.13 in early January.
All of this is just speculation on some large flash crash kind of drop happening, but the market is certainly ripe for some kind of surprise as October has been a "non-event" month... very boring. That's unusual to see, so as the month ends and November begins there's a nice window where a shock drop could happen.
If it happens and turns out to be ugly this week I'd look for support (this assumes 7500 doesn't hold, and a drop to that zone "only" is not what I'd call ugly) at the prior lows from 7/29 to be a logical target. I don't think that will happen but if the rising trendline of support gets broken then that's the next support, and after that is the June low in the 7200's... again, I'm not looking for that kind of drop. But this election is so important that anything that surprises the market can cause a shock drop move.
Meaning that 7063 FP on the ES could be the target, and the 692 FP on the SPY just a little lower, but that's crazy levels and odds of them hitting are less then 1% I'd say. Realistically we should just drop to the 7500 zone, or maybe into the 7400's so that rising support trendline is pierced to lure in more bears. So don't get all caught up in a flash crash happening, but instead just be aware that the wave count setting up supports a new lower low into the election or a few days afterward.
Lastly, how high could the bounce go that started at the low on Friday? It will be the small wave 4 on the main wave count, so it should be a lower high then the top of small wave 2, which was on Wednesday the 28th. Most of the time get a 50% retracement, sometimes 61.8% or even 78.6%, but you should NOT take out the prior high for small wave 2, as if you do then the wave count is wrong.
Oddly, there is a "possible" FP on QQQ from the 29th with a high of 726.15, which is roughly equal to the close on Wednesday the 28th. If that were to happen into the election it would completely wipeout the entire drop on Friday and would kill the main wave count. I'd then have to think it's a small wave 2 up inside medium wave C down, which I have on the main count as that wave ending on 28th.
Here's a close up look at that wild card wave count...
Basically medium wave A down didn't end on 10/16 as on the main wave count. On the wild card wave count that only ended small wave 3 inside medium wave A, which doesn't end until 10/23, which then makes medium wave B up ending on 10/28...not 10/21, and that means the drop on Friday (a clean 5 wave move) was only small wave 1 down, and small wave 2 up can last into the election and possible hit the FP on the QQQ, which is almost a full retrace of the drop on Friday. It would then setup a small wave 3 down, (and 4 and 5) inside medium wave C to happen sometime shortly after the election results come in, which if bad for the Republican's could cause a drop to the 7063 FP on the ES or the 692 FP on the SPY.
Buckle up and keep a bucket near you in case you need to throw up... LOL
Good Luck.
P.S. The date the FP came out for the ES was 6/2/2026, which is 6 (2+2+0+2=6) 6, or 666.
P.S.S. What if the drop bottomed on 11/6/2026, which is (1+1+2+0+2=6) 6 6... another 666.
