SPX and NDX: Intermediate Signals Remain Mixed

Monday's update noted that the charts indicated that at least a minor top was probable, and so far Friday's print high of 1409.15 has held for two sessions.  The questions still abound about the intermediate term, however.  In this article, I'm going to cover a few things to watch going forward.

The first chart I'd like to call attention to is the Dow Jones Industrials Bullish Percent Index (BPINDU), which has yet to relinquish its intermediate sell signal.

 
Next is an attempt to decipher the Nasdaq 100 (NDX) long-term chart.  Note that daily MACD has now crossed over onto a buy signal (this is true on several other indices as well, including SPX), and is rising from an oversold position.  Also of note, it is difficult to count the rally since 2009 as a complete wave structure, which suggests at least one more wave up is due before a long-term top.

The question this chart poses is whether the current decline is part of a complex fourth wave correction (black) or has now marked a complete intermediate low (gray).  It is, of course, possible that the 2012 print high marks the end of the line for the long-term, but that simply doesn't reconcile as well -- though the trend line breaks are of concern to the bull case.  Note the nice three-point validated green trend line that's formed, indicating that it's likely important for bulls going forward.

For the moment, I remain long-term neutral on equities, since (as the charts above hint at in a "tip-of-the-iceberg" sort of way -- there are a lot more charts I'm watching and not publishing), there are still too many mixed messages out there to gain a clear read.  Accordingly, I've decided to split the S&P 500 (SPX) charts into a bull chart and a bear chart (which makes my job a little more work, but should make the charts easier to follow for readers).  Each chart notes some key levels, signals to watch, and projected outcomes.

First up is the bull chart: (continued, next page)

And next is the bear chart, which indicates the potential of a complete ABC rally and, with it, a meaningful top.

In conclusion, the markets are still giving signals which run at cross-currents to each other, and the current wave counts are open to an unusually high degree of interpretation.  This can easily lead to "seeing what you want to see."  I try to avoid that trap whenever possible.  Do note that, for the moment, both wave counts remain aligned in suggesting a continued correction lower over the short-term -- but the question I can't answer (yet) with the market in this position is "how deep?"

In the most unbiased opinion I can muster, the decline from 1474 still counts best as a correction, and the sharp Thanksgiving-week rally counts best as an impulse, which does suggest that the 1343 low may hold for a while.  This leads me to want to give the bulls a slight intermediate edge -- however, my intermediate indicators (many not shown) remain completely split on whether this market is a buy or a sell, so I feel that to convey any high degree of confidence here would be grossly misleading.  Until certain key markers are resolved, my bottom line feeling is that this market still needs to be taken one trading day at a time.  Trade safe.