SPX, Oil, RUT, INDU, US Dollar Updates: Market Entering Dangerous Waters

The market is entering dangerous waters, and there are several indices now at critical support levels. It appears likely that the market is in the early stages of an intermediate trend change. 

It's been challenging lately, with the market looking bearish one day and bullish the next, but such is the nature of trading ranges.  As I've said before, until it breaks one way or another, it's not necessarily advisable to get too attached to a position.  I suspect a trend change is starting, but I'm not yet married to that view, until it confirms.  It also bears mention that this type of market, which is "headed to the moon!" one day and "crashing to the ground" the next, is characteristic of a top.

The bearish trade trigger of 21 points (a break of 1394 targeted 1373) mentioned on Thursday, was easily captured on Friday.  This is as painless as trade triggers get, since this trade took virtually zero drawdown.  There are more trade triggers setting up now across several markets.  Before we get too into the short-term, I want to examine a few long-term charts in detail.

The charts pretty much tell the story.  First up is a very long-term chart of the New York Composite (NYA).  NYA is holding just above what has been an important pivot many times in the past.  The chart isn't log scale, but the log chart reveals the same key pivot.

The S&P 500 (SPX) also tells a similar story, and is now sitting right on the median channel line of the uptrend off the March '09 lows (black dotted line).  It's also sitting on the parallel channel line of the '03 and '09 lows -- which "just happens" to match the trendline connecting the 2000 and 2011 highs (red line).  Both the black channel median line and the aforementioned red trendline are important to the bull case.

The Russell 2000 (RUT) is another market holding just above important support, and has now developed a potential head and shoulders top, just as I speculated it would a month ago.

A study of the RUT weekly candlestick chart may also be revealing.

INDU also sitting on trendchannel support.

Conversely, the dollar looks ready to rally.  This chart has played to perfection since I first published it.  It's important to note that the red b-d trendline (okay, fine -- the trendline is blue, the "b" and "d" are red) needs to be broken for first confirmation.  The blue wave-a high needs to be broken for final confirmation.

Oil continues to look bearish, as mentioned on April 4.  The next target for oil is 91-92.

The bearish SPX count is looking decidedly more probable.  It's important to remember that 1357 needs to be broken to confirm.  The chart below shows the next bearish trade trigger, which could be considered to have triggered on Friday, however, the "safer" trigger is shown in the chart beneath this one. 

Here's another way to view the bearish trade trigger.  There's a bullish trigger shown too, but is seems so very far away now.  However, nothing's impossible in a range-bound market.  Just as the market showed little support when it fell back into the range (as I warned), there is also little resistance in that range, and the market could race through it again.  I'm sure all it would take is a wink and a nod from dear old Mr. Bernanke (aka - The Beard). 

My best guess at the short-term wave count for SPX is shown below.  The odds do favor a larger bounce developing soon, but, as is the nature of odds, they don't guarantee it.

And finally, the short-term view of the INDU.  This chart shows a potential head and shoulders in development, to go along with the SPX and RUT.  The alternate count shown here is still technically possible, but seems lower probability.  It is shown largely because the impulse wave lower has not quite confirmed yet.

In conclusion, the market is very close to confirming an intermediate trend change, but has not quite done so.  The preponderance of evidence seems to suggest that it will confirm soon enough.  Of course, we've seen this movie before.  The good news is that there's plenty of key support levels which have entered the picture, and which should keep us pointed in the right direction.  Trade safe.