April 20, 2025

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Tracking Account Valuation January 4, 2022 – $1,206,085

Tracking Account Valuation January 4, 2025- $1,844,396  +70%

Tracking Account Valuation Currently- $2,854,227 +137%/+55% YTD

“There is nothing new under the sun.” Ecclesiastes 1:9

“What happens today has happened before and will happen again.” Jesse L. Livermore

“Excesses in one direction will lead to an opposite excess in the other direction.” Robert Farrell

“Seeking truth (VERITAS) is a journey without end.” Alan Garber, President, Harvard University

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Positions: 3% VXX, 16% SPXU, 14% TZA, 67% Cash

Hard stops: VXX 39.73, SPXU 22.67, TZA 13.78

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Thurs 4:00- Stoch: Rising Itdy- BLSH

Daily      LOLR      STS

5/2-DT  7/0-UT  7/0-UT

Breadth: 1431/1489

ADR* 3.22/SPY +0.75

NYMO: +350Rising

NAMO: +25 Rising

*ADR= NYSE A/D Ratio

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Throughout 2024, we emphasized a critical shift in market psychology — from euphoria and complacency to anxiety and disbelief — alongside steadily deteriorating internal conditions. These are the classic hallmarks of a major cycle transition. As momentum waned, breadth narrowed, volatility crept higher, and leadership stocks faltered, the broader market structure began to crumble, even as the S&P 500 clung to its highs.

We called attention to the significance of historical cycles and behavioral patterns. The speculative excesses of 2021–2024 mirrored those seen at past peaks, while the structural divergences resembled the final phases of major bull runs, particularly those in 1987, 2000, and 2007. True market tops rarely arrive with a headline. They unfold quietly, masked by confidence, denial, and FOMO.

But now, the tone—and the evidence—have changed. What was once a gradual deterioration throughout 2024 has become unmistakable in 2025.

Recent price action confirms that the topping process is behind us. We are now in an active Bear Market.

The market’s character has shifted. Lower highs and lower lows now define the trend. Rallies are being sold more aggressively. Breadth has worsened meaningfully, and while broad capitulation hasn’t yet taken place, sentiment indicators reflect the growing anxiety that often marks the early stages of a Bear Market.

This month’s decline isn’t just another pullback. It’s a structural pivot — a transition from risk-taking to risk aversion.

Elliott Wave Analysis: Mapping the Structure Since February 19, 2025

To frame this evolving downtrend, we turn to Elliott Wave analysis. Taking February 19, 2025 — the date that now appears to mark the final peak of the preceding bull cycle — as our starting point, the S&P 500 is traced out and will soon complete what seems to be a classic five-wave decline, consistent with the onset of a new Bear Market, just as it did in 2007:

 

The current pattern strongly echoes the structure at the beginning of the 2007–2009 Bear Market. Here’s how the five-wave sequence in 2025 has unfolded so far:

• Wave 1: The sharp, unexpected drop from the February high signaled the end of the uptrend and caught many participants by surprise.

• Wave 2: A modest rebound — the “buy-the-dip” rally — reflected lingering bullish denial.

• Wave 3: The most forceful and emotionally intense decline. Volume surged, breadth collapsed, and leadership deteriorated across sectors.

• Wave 4: A choppy, sideways-to-upward correction temporarily calmed nerves and gave some hope that the worst had passed.

• Wave 5: The latest leg down—driven by mounting fear and persistent selling—confirms the reversal and will complete the initial five-wave structure.

If this interpretation holds, Wave five is underway, and it suggests testing or breaking the 4850-4900 SPX area in the days ahead. We are approaching the completion of the first major leg down in a new multi-year Bear Market.

According to Elliott Wave principles, a countertrend A-B-C rally typically follows a five-wave pattern. Those unfamiliar with the broader pattern will likely mistake the approaching corrective bounce for a new bull phase when it gets underway in late April or May of 2025.

But unless this rebound breaks above key structural highs, it will more likely serve as a setup for the second, deeper and more grinding wave of the Bear Market to unfold later this year and next.

Conclusion: Preparing for the Next Phase

The path ahead will not be linear, but Elliott Wave theory gives us a framework to anticipate how the trend may evolve. With the first leg of the Bear Market likely complete or nearing completion, a rebound will likely follow. Yet investors must remain aware that Bear Markets unfold over time, cycling between temporary relief and renewed declines that steadily erode optimism and capital.

For added perspective, let’s revisit what followed the initial five-wave decline that marked the start of the 2007–2009 Primary Bear Market:

As the image above shows, once wave five was completed in March 2008, a Bear Market Rally carried prices higher until mid-May 2008, followed by a more significant, more violent five-wave decline into early March 2009.

Our path today will not mirror 2007–2009 in every detail, but it will likely rhyme with that broader structure. Psychology as much as price shapes Bear markets, and while history doesn’t repeat precisely, the emotional and structural patterns often reemerge with striking similarity. Elliot wave analysis allows us to visualize and approximate the structural pathway ahead.

With sentiment, cycles, and structure now aligned, the case for a lasting Bear Market is stronger than ever. We’ll continue monitoring internal indicators, leadership behavior, and the wave structure to guide positioning as this phase completes and the next phase of this Bear Market takes shape.

As always, we’ll be back at 9:15 AM on Monday to review overnight futures and any developments that may alter the near-term picture.

Wishing a happy and blessed Easter from our family to yours.

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