SPX and INDU: Bulls on Thin Ice

Yesterday's target of 1333 was hit perfectly, and the market generated a bounce... however, the bounce did not look impulsive -- as of the Wednesday's close, anyway.  This is suggestive that there will be a retest of the low, or perhaps a new low to follow. 

Quite frankly, the bulls are walking on thin ice here.  After reviewing a lot of indices tonight, I'm now equally split on the odds for the bull and bear counts.  There is still a little bit of room for the bull count -- however, the INDU broke down below its rising support line, and the bulls are running out of real estate. 

There are also potential sell triggers lining up across the board.  The invalidation levels are getting close, though I have this irrational fear of this being wave c of a huge expanded flat -- which means it would invalidate the bull count as shown, and then rally up to new highs.  Let's not worry about that yet, though.

 


The SPX chart suggests there may still be a retest and/or new low in the cards, but there are a lot of indications that the market should bounce from within this general vicinity.  The shape of the bounce should tell us a great deal. 

The decline still currently counts better as a 3-wave form, but there are ways to view it bearishly.  Quite frankly, I have a very hard time seeing the most recent leg of the decline (from 1361) as any type of a third wave.  It's been far too mild... thus, if the bears have any hope, they have to see it as either a fifth wave, or another first wave.  It works fine for the bull count, though technically c-waves are also third waves, they aren't always as strong as the true third wave in a larger impulse.

In conclusion, the bull count still has some potential, but bulls will need to pull things together awfully fast at this stage to make it work.  Keep in mind that if a half-way decent bottom (or top) is going to form, it will do it's best to get you on the wrong side of the trade.  Trade safe.