SPX Update: This is Still the Bulls' Battle to Lose

Before I get into the market update, my heart goes out to all those impacted by the super-storm on the East Coast.  Those affected are in my thoughts and prayers, and I wish you all the best in recovering.

Despite two days of storm-related market closures, there's been no material change in the outlook since Friday.  It is still anticipated that the market is likely to find a bottom in this zone and head toward 1480 -- though if for some reason it doesn't, then things could get very bearish.  

The S&P 500 (SPX) chart below outlines the preferred path, as well as the short-term (ST) alternate path (which allows the margin-of-error of a marginal new low), and the intermediate-term (IT) alternate path (which allows for a major trend change at 1474).  It's obviously too early to confirm a bottom here, especially since the short-term trend is still down -- so we'll watch how it unfolds going forward.  (continued, next page)

 

The 5-minute chart outlines the preferred and alternate short-term paths, which should be similar -- with the caveat that the market must rally back above 1417.09 to add confidence.  There are two levels noted which provide a warning to bulls and an invalidation of projections, respectively -- and an invalidation would suggest the 2nd alternate count outlined.  Trade below 1403 would indicate this 2nd alternate count is more likely, and that the wave labeled as blue 1 was actually the c-wave of a complete correction -- if that were to be the case, bulls would be wise to exercise considerable caution, as it could shift the intermediate picture to a more bearish stance.

In conclusion, it appears the market is trying to build a base here for a larger rally.  As long as the 1390-1400 area holds as support, the bulls maintain good probabilities for a trip to new swing highs. However, as discussed on Friday, if for some reason the market can't find support in this zone, that could indicate considerably more weakness on deck.  Please see Friday's update for more detail.  Trade safe.