SPX Update: Is This 2009 All Over Again?

The market hasn't had much good news lately, yet so far the sell-offs have been pretty mild.  It feels like neither bulls nor bears want to commit, and no key levels which give a significant edge to either side have yet been claimed.  Yesterday, the Russell 2000 (RUT) came within pennies, but still failed to break 765.

Before I get into the current charts in detail, I want to share an interesting analog I stumbled across while I was doing some historical chart studies on Thursday night (this is what I do while normal people are watching TV).  Below are two hourly charts of the S&P 500 (SPX):  2008-2009, followed by the current market.  At the moment, the patterns look remarkably similar. 

If readers recall the time just after the 2008 election, the news cycle was similar (in sentiment) to the current news cycle: rapidly alternating hope and fear.  My recollection is that the overall mood was darker then, but I'm not sure if that was actually the case, or if we've just gotten used to it.

Whether the analog will hold or not remains to be seen, of course.

This current pattern is every technician's worst nightmare, because the possibilities from here are extremely numerous.  The advantage in 2008 was that the larger pattern was much more defined and the correction (referenced above) was clearly counter-trend to the larger existing downtrend. 

In any case, coming back to the present: quite frankly, at this exact moment, all I can do is speculate about the short-term.  Of course, speculation is all trading ever truly is, but usually the charts are a bit cleaner than they are right now. 

I'm trying to factor in everything currently in the charts (short and intermediate term) in order to draw a coherent overarching picture:

1.  Short-term, the decline from 1391 still looks corrective.
2.  New swing highs above 1391 have continued to appear slightly more likely.
3.  On an intermediate level, since 1266, the pattern seems to have too much price overlap to be viewed bullishly.

While studying the charts and trying to reconcile all these factors, I realized that an ending diagonal fits all existing criteria, and the wave forms, quite well. 

So, while the pattern shown below does break the interesting analog from the first two charts, it also fits all currently available price info, which means it's worth sharing.  This pattern would also allow additional bullish sentiment to develop, since it would mean there are one or two more sideways/up waves still to come.

The big picture SPX chart is little changed and the wave peak could be in place at 1391.  If that's the peak of the wave, it represents a very bearish short-term pattern, but at some point, the market needs to actually sell off to validate that potential pattern -- and so far it just hasn't wanted to.

Friday is a non-farm payroll day, and that lends to volatility, so I suppose the opportunity might be there for either Friday or Monday -- but bears are running out of time over the short-term.

Regardless of what the market's short-term plan may be, my intermediate outlook currently remains leaning bearish.

In conclusion: the short term picture remains hazy, and has continued to reward nimble traders and punish the over-confident.  The short-term is still up for grabs at this moment, though the ending diagonal shown earlier would make a fitting end to this pattern.  Trade safe.

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