These are my least favorite days to write newsletters. By the time you read this, the markets will likely have already made up their minds, either gapping up or gapping down based on Friday’s PCE numbers. If SPY takes out Thursday’s low, we’re likely headed for a quick flush into the $645 region, which should act as support. If that critical support doesn’t hold, it opens the door for a deeper pullback toward major support at $620. On the bullish side, if we push through $661, then it’s business as usual—and that three-day dip will have been all we get before ripping to new all-time highs. That’s been the story of this summer, so it wouldn’t surprise me at all to see it play out again.

That said, I didn’t buy SPY or QQQ here, as the risk-reward isn’t super appealing in my view. However, if we dip back into $640 on SPY and $575 on QQQ, the setup gets more enticing. A break of Thursday’s candle would also mean breaking the lower trend channel, which could signal more weakness and potentially bring SPY into its 50-day EMA—a level it hasn’t touched since the May 12th gap. That would mark a much-needed breather. As I laid out last week, this bull run has been historic, with very few instances in history where SPY has stayed this strong without even retesting its 20-week EMA.

If we do get a bigger pullback—and I’m not convinced we will unless major supports break starting with Thursday’s candle, then $645, and then $635—we should see some excellent buying opportunities as leverage gets flushed and some of the fastest movers reset properly. We’re already seeing glimpses of that with names like ALAB, NNE, and OKLO pulling back hard, even as the broad market barely hiccups. My view is that sectors like AI energy, semiconductors, and AI more broadly will likely see sharp moves higher once the selling runs its course.

SPY

We also saw Bitcoin and the broader crypto market break down on Thursday, sparking panic and renewed fears that the top is in. That’s certainly possible, and I’ve been warning about the bull trap since August 14th. In past cycles, every bull trap led to a significant drawdown—22% at the shallow end, 77% at the steepest. A 22% pullback now would take BTC to around $97,000, which also lines up with the 120-SMA on the 3-day chart. That’s the moving average I use to separate bull and bear cycles, and it’s been reliable this run. That zone also lines up with the year-to-date anchored VWAP near $99,500. I don’t personally believe the cycle is finished here, and I expect at least one more push to new highs—but I have to respect the charts. If BTC closes below this cycle’s channel at $100,000, below the AVWAP, and below the 120-SMA, that’s a major red flag.

For risk management, I have to lay out the bearish case. There are five reasons to think we may have topped:

1. A completed Elliott Wave count.

2. Timing—tops tend to come 330–547 days post-halving. The August top came 481 days post-halving.

3. DXY and BTC are inversely correlated, and DXY looks like it’s bottoming.

4. My MSTR study projected a top on August 22nd—we topped on August 14th!

5. A bull trap at the highs, just like the last two major drawdowns, including the 2021 double top.

I still lean toward one more push to new highs, but I have to stay mindful of my own bias. Each key support that breaks adds weight to the case that this cycle isn’t different—and that a significant, multi-month drawdown could be ahead.

I’m not trying to sound bearish or alarmist, but I’d be remiss not to share what the charts are showing. If BTC can hold $109k and bounce, that opens the door for another leg higher. After all, we already have five waves down for the C-wave in the blue count, so a running flat setup isn’t out of the question. But if we break down, the $90k range likely comes into play. And if BTC starts printing numbers with an 8, this bull cycle is in serious jeopardy.

BTC 3 Day Chart

BTC Bear Case

BTC Medium Bull Case