SPX, BKX, and Dow Updates: Market Potentially at a Major Pivot

As I said yesterday: the market's not doing anyone any favors right now.  After playing around with a number of indices, the short term waves can be counted pretty much however you want.  The market is in something of a no-man's land right now.  I finally just handed the chart to Johnny and asked him what he could make of this (see below).

This is one of those times it would be really nice to have some more info from the market before attempting to make a solid call. 

Tomorrow is a non-farm payroll day, and 8 of the last 9 NFP days have been red.  The market also has a tendency to reverse from whatever direction its heading when the report comes out.  So bears probably want it to be heading higher when the report is released.  Bulls want it to be heading lower.  And Leon's getting laaaaaarger.

Of those 8 recent red NFP days, 50% of them have marked fairly large turns lower.  Also of note, Dr. Seuss's favorite chart ("One Rectangle, Two Rectangle, Red Rectangle, Blue Rectangle") is still within the potential blue rectangle turn window.  Some readers may remember this chart from way back on Sunday:

I remain barely in favor of the market having made a turn at 1378.  But any trade above that high would make a run into the 1400's almost a given.

I took a crack at a lot of charts tonight, and want to lead off with the Dow chart, because it does provide a cleaner possible way to count the rally of the last couple days as an a-b-c.  The SPX chart which I'll share after that... not so much.  What happens today/Monday should be hugely helpful in sorting out the larger counts.

In a moment I'll explain why I remain slighly in favor of the more bearish count, which is still almost a coin toss, in my opinion.

So why do I remain slightly in favor of the bear count?  Well, in part it hinges on the BKX charts. But even those aren't clear-cut -- because the BKX bearish count in turn hinges on the idea of a failed wave (v) of 5.  If the price high is the actual high for wave 5, then the decline was a clear a-b-c correction.  If the failed fifth is correct, then the decline is a clear impulse.  It's a tough call; see for yourself.  Here are the charts for BKX. 

The short term chart (first) shows a clean 5-wave decline.  The question is whether it's wave 1 (or a) or wave c of 4.  The second chart shows why I think it's 1 (or a).

As can also be seen in the big picture BKX chart, another decline leg could still unfold before the rally resumes (gray "alt: (iv)" label).  That might be a good option to help the market screw everyone.

Next, the SPX leading diagonal count from yeterday.  The short-term labeling shown here feels like a stretch.  If this count is playing out, the wave labeled iv could also be wave a.  The potential ending diagonal highlighted (converging blue lines at the top of yesterday's move) does look like it needs another small wave up to complete.

The next SPX chart (below) shows the more bullish labeling.  The good news is that if the market breaks out, there are a number of potential trade triggers in formation, and there should be some decent money to be made on the long side.  The other good news is that the bearish count invalidation level is only 10 points up, so there could be an answer soon.

The chart mentions the island reversal bottom which occurred with yesterday's gap up.

There should be a good trade-able pattern developing if the more bullish count plays out, and I'd recommend taking longs at some point if the bearish count is invalidated.  I'm almost rooting for the bull count, because it should be "easier" money.

In conclusion, the market seems to be at an important pivot.  A break above the recent highs should carry the market into the 1400's, and possibly even into the mid-to-high 1400's.  If the bear count is playing out, there may be an important top under construction.  We should have a clearer answer soon -- and always remember: cash is a position too.  Also keep in mind the NFP info discussed earlier. 

And if you have any questions, just ask Johnny.  Trade safe.

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