SPX and BKX Update: The Moment of Truth

In a perfect world, the completion to the Minor (2) rally would mark a new high which exceeds the October top.  My preferred count of an ending diagonal suggests that perhaps the session today or tomorrow will finally complete that top.

Since Wednesday, the market has kept us guessing about its short term intentions, while it's traced out a pretty ugly consolidation in the meantime.  As I write this, the futures market is trending higher, so hopefully today or tomorrow will finally provide an answer to the question of exactly where Minor (2) completes. 

Assuming the big picture count is correct, the suggestion is that a large and extended decline in equities is just around the corner.

There really isn't much to add to the information presented in the articles over the past few days.  One chart worth updating is the Philadelphia Bank Index (BKX), which has so far performed in accordance with the projections posted in Friday's article -- which expected more upside and a new high for this move.  Both those things have happened, but further upside is still expected.  The question this chart poses is whether the BKX is forming an extended fifth wave, which is nearly complete (blue count); or if this current rally is only part of the third wave of wave c of (y) (black count).  The diverging RSI and MACD seem to argue that the extended fifth wave is unfolding.

The S&P 500's (SPX) preferred count of an ending diagonal would look perfect with one more lunge higher, ideally above 1292.  The implication of the very short-term wave count on the chart below is that the price should not exceed 1301.24.  Even in ending diagonals, the Elliott Wave Theory rule that the third wave cannot be the shortest wave still applies.

Below is an alternate interpretation of the short-term wave structure.  If the market exceeds 1301.24, then the count below (or some slight variation thereof) will move into the preferred role.

Beyond that, there simply isn't much to add to the technical picture from the last few days.  One of my favorite, and very reliable, indicators is approaching a major sell signal.  A decent rally on Tuesday is likely to trigger the indicator, and that sell signal would coincide nicely with the ending diagonal wave count which believes the top could be just hours away.  Trade safe.

The original article, and many more, can be found at http://PretzelCharts.blogspot.com