SPX and More Update: Bulls Walking a Fine Line

Range bound markets are so much fun!  And by that I mean they can be a pain in the butt.  One minute, everything looks bearish, the next it looks bullish, and the next it looks neutral.  This is why it pays to realize that the majority of what happens within a range bound market is noise.  Until a breakout/breakdown materializes, there's not much for either side to cheer about.

The market is not looking nearly as bullish as it did a couple days ago, though this could still be the "typical scary wave (2) correction" I talked about then.  I do want to call attention to the bigger picture though, as there are a few things the bulls need to resolve if they want to convince people to continue to buy bucketloads of their inflation-driven inventory.

On the big picture chart below, we can see that so far, we have nothing but a lot of failed backtests of the old uptrend.   The only index that looks reasonably strong on this chart is the Dow Jones Industrial Average Marginal Mediocre (INDU).  It's the only one not looking "average."  The rest look like if they experience much more downside, there's going to be trouble.

(Right click and select "Open in New Window (or Tab)" to bring up the full size chart).

The next chart is the count that bulls are hoping for, and it could still play out this way.  Even under this blue bullish count shown below, the market looks to me like it needs some more downside before any larger rally can get started.  

The head and shoulders trigger did elect yesterday, but if the bull count is playing out, don't be surprised to see that target fall short.  Bears need to be very cautious on any substantial whipsaws of that trigger (see second chart).

The black bearish count shown below would, of course, spell trouble for bulls.  As I mentioned yesterday, a close beneath 1380 would be bearish. 

The next chart examines a more bearish potential in detail.  If the bears wish to maintain any hope of this count working out, they need to defend the area in and around the yellow box.  If the bull count is playing out, then the wave labeled as blue 1 on the chart below is instead going to mark the bottom of c of (2) as shown above (the bullish count isn't labeled on the chart below).

And finally, the intermediate trade trigger chart shown yesterday.  Until market breaks out one way or another, there's not much to get excited about big-picture-wise.

In conclusion, the market looks like it's hanging by a thread (again).  Over the very short term, I'm expecting new lows are still to be made, but beyond that, the bulls probably need to pull things together fairly quickly to keep their intermediate hopes alive.  Trade safe.