SPX, COMPQ, and...

The last couple updates suggested that a larger bounce could occur any time in SPX, and here we are.  The chart below further elucidates the landscape for both bulls and bears:

Now, we can't rule out bears making a stand sometime soon and turning things lower in order to create an impulsive decline.  But right now, all we have in actuality is three waves down, so there's nothing "deterministic" about this pattern and bears should be ready in the event the market elects to disappoint them.

COMPQ is in a similar position, but (more clearly than SPX) seems like it probably "needs" another wave up to new highs, either immediately or a bit down the road. [Note:  Please ignore the blue "(1)" on this chart.]

On another, unrelated, note, a few days ago, a friend sent me a link to an interview with the CEO of Redfin, regarding the current real estate market; quoted in part below:

Usually when sales decline, prices drop too, and then sales increase later—that’s the cycle, he said. Homes become affordable again, and sales pick up because of it. This situation is very different. Interest rates are up, and sales volume has fallen through the floor, as he put it, but home prices haven’t followed. “Some of that is just this artifact of 30-year mortgages,” he said. Everything the Federal Reserve is doing has no real effect on homeowners, apart from keeping them where they are. “It actually has the perverse effect of keeping home prices high,” Kelman explained.

Just over two years ago (on April 18, 2022), I went completely against the "everyone knows rising rates will crash housing!  Common knowledge!" and instead predicted the following: 

Rising rates do, of course, have an impact on future affordability -- but they have no impact on families already in a home (presuming these families have a fixed-rate mortgage, which, as we already covered, the vast majority do). If anything, rising rates might tend to inspire people to hang on to their homes longer instead of putting them up for sale, which would have a tightening effect on inventory.  After all, if you're in a mortgage at ~3%, what possible incentive do you have to ever exit that loan with inflation running above or near 8%? 

As I mentioned earlier, inflation should provide a tailwind for housing -- in more ways than one. If my reasoning above is in the right ballpark, then rising rates may, perhaps counterintuitively, provide impetus for inventory to ultimately balance. Houses might spend more days on market due to fewer buyers, but if fewer homes are being brought to market in the first place because families are incentivized to stay put (or to turn their old 3% mortgage home into a long-term rental), those seemingly-opposed forces could tend to counteract each other.

While I took some flak for that prediction in the Spring of 2022, as it turns out, that's exactly what has come to pass in the years since.

 

In conclusion, bulls have so far turned the market back up where it was expected and where they needed to.  Bigger picture, bulls probably continue to have the advantage unless bears can reverse this and form at least one more new low, to give the decline a more impulsive appearance.  Trade safe.

SPX, COMPQ, BKX: As Far as the Eye Can See -- for Now

Last update ended with (in part): 

In conclusion, SPX captured Target 2, good for around 200 points of profit for readers. It would look a little better if it were to head at least a bit deeper into the 4970-5005 zone, but that's not required and if that's ALL OF 3/C down, a big bounce is possible any time.

SPX did indeed head a bit deeper into the target zone, and even exceeded it slightly.  That's about as far as I can get us for the moment and I now have something approaching a neutral stance, at least from an analytical standpoint.  A big bounce is indeed possible from here, though I have no strong opinion yet on whether it will materialize directly or if further lows are pending.  I can't see around every corner, and sometimes it's best not to attempt to.

COMPQ discusses one "bullish" option -- and because we don't yet have a larger impulsive turn, bullish options remain very much alive and well for now:

Finally, BKX bounced almost immediately after I posted the red "1?" label:

In conclusion, unless/until we see a larger impulsive turn, it's worth remembering that SPX and COMPQ are still very much in the running for new highs, and there are now enough waves down for that to happen from this general area.  If they do, instead, go on to form larger impulsive turns, then bears will have more leverage than they do now.  Trade safe.

SPX and BKX: SPX Captures Target 2

In the prior update, I wrote that I expected SPX to capture Target 2 (4970-5005, from 4/12) and yesterday, it dropped down to 5001, capturing that target.  The immediate question now is whether wave v is close to being complete -- or if it will extend.  

After that, the next question is as discussed last update:

As we can see on the chart above, to complete C/3 down, bears would need another new low, which I'm currently inclined to suspect they'll get after a bounce. That would complete red v, which would complete THREE waves down [4/19 Note:  We are here now, at three waves down.], so from there, a rally to new ATHs would not be off the table. For bears to demonstrate more control, they would then need a bounce in a larger 4th wave, followed by another new low, at which point, we could conceivably label the entire wave off the ATH as an impulse.

Now, something worth mentioning:  It's unusual for a simple ABC correction (i.e.- a three wave move) to show the type of strength we've seen in this decline -- it's far more common to see this during the third wave of an impulse.  That said, it's not entirely unheard of, just much less common.  So, given that, the odds probably favor this becoming a larger impulse in the end.  Keep in mind, though, that odds are just that:  Odds.  They're not guarantees any more than you're "guaranteed" to win when you start with pocket aces in Texas Hold 'em.  Just like in poker, no matter how good your odds, you're still going to lose sometimes, irrespective of how strong your starting hand seemed before the flop.

BKX, though, does seem to continue to suggest that a major turn from the recent all-time-highs is quite possible:

In conclusion, SPX captured Target 2, good for around 200 points of profit for readers.  It would look a little better if it were to head at least a bit deeper into the 4970-5005 zone, but that's not required and if that's ALL OF 3/C down, a big bounce is possible any time.  If SPX does head a bit lower, then we'll have to watch and see if the fifth wave wants to extend or not, and I currently have no opinion on whether that will occur (it's essentially unpredictable), so don't go in "expecting" an extension, nor "expecting" the opposite -- stay nimble out there.  And trade safe.

SPX and BKX: SPX Captures Downside Target

Since last update, SPX captured its downside target of 5070-90 from April 12:

As we can see on the chart above, to complete C/3 down, bears would need another new low, which I'm currently inclined to suspect they'll get after a bounce.  That would complete red v, which would complete THREE waves down, so from there, a rally to new ATHs would not be off the table.  For bears to demonstrate more control, they would then need a bounce in a larger 4th wave, followed by another new low, at which point, we could conceivably label the entire wave off the ATH as an impulse.  The alternate bull count is that a WXY is complete/completing.  So, for now, bulls still have options in SPX.

BKX formed another low, which makes the decline appear reasonably impulsive -- although, to be completely objective, it would look a bit better at the micro level with one more low, so I can't be 100% on the "1" label just yet, though I'm leaning that way.

In conclusion, we have an apparent impulse down in BKX, but not yet in SPX.  One possible conclusion is that we're closing in on a trend change (BKX could bounce in wave 2 while SPX made another ATH, then the rug gets pulled).  That said, if SPX were to go on to form an impulsive decline (conditions for such outlined below the SPX chart) immediately, then, in that event, we would presume the trend had already changed at intermediate, and possibly long-term, degree.  Trade safe.

SPX, BKX, NYA, TLT: Examining Both Sides of the Trade

Last update noted it was bears' ball "for now," and I think we can call that a hit, but today we're going to examine both sides of the trade.

To do that, let's start with BKX:

NYA is in a similar position:

SPX has kept alive "Option a" from a couple updates ago:

Finally, the TLT update I promised on Friday (on the Forum):

In conclusion, because of BKX and NYA, we can no longer be 100% certain that it's still bears' ball (I anticipated this potential, which is why I included "for now" in the statement last update).  That said, it feels like bears may have more in the tank (perhaps after a bigger bounce), but this market hasn't been kind to "feelings" for a while, so take that with a grain of salt and we'll let the charts lead where they may.  Trade safe.

SPX, INDU, BKX: Bears' Ball -- for Now

Last update discussed two options for SPX, and it appears that SPX choose the first of those two options:

As discussed on Wednesday, both of those options were ultimately bearish in the event of a break of 5146 -- which means that the "bounce" option was corrective.  Which in turn means that it (the bounce) doesn't need to reach the 5230 threshold -- since corrective waves are not bound by rules, targets can be simply described as "most commonly, here's what happens," but being against the larger trend, corrections can (and often do) fall short.

So, presuming bears hold 5257, we may be witnessing a change of trend that's going to last for more than a minute.  The bull option is that this will go on to form a larger fourth wave (still likely to be of decent size and duration), and then go on to a last hurrah.  Perhaps this is best illustrated by INDU -- though please keep in mind that the fourth wave as drawn on that chart is highly speculative and has been on there since January, so its potential targets will need to be updated as things develop.

The most bearish option is that the last hurrah is already over, as best illustrated by BKX:

In conclusion, Wednesday's break of 5146 is technically significant and implies we may be looking at a developing bear nest, which will lead to a stronger sell-off.  There are still other, undiscussed, bull options, but the first thing bulls would need to do to give those more consideration would be to break above 5257.  Assuming that doesn't happen, then the "Occam's Razor" interpretation is that bears may have the ball for a bit.  

SPX and BKX: "I'll Just Leave This Here"

The market didn't go anywhere since last update, but I have outlined a couple of the "bad news" (for bulls) options on the near-term SPX chart:

Of course, those are not the only two options in the event of a breakdown at 5146, just the two "most obvious" -- the market is sometimes more probabilistic than deterministic, so I almost never entirely write anything off.

Bigger picture, as the internet is fond of saying: "I'll just leave this here."

Not much to add beyond that -- just that if bears can sustain a breakdown at 5146, while it doesn't guarantee (anything, ever), it does at least put bulls on significant notice, at least for the immediate term.  Trade safe.