On Friday, I wrote that my "gut call" was for SPX to decline directly, but that an immediate decline would offer "above average odds for a buying op." By Sunday night, everyone thought I was nuts: ES futures gapped down big at the Globex open -- and if the cash market followed suit, it was toast. But despite that sea of red in the futures session, I nevertheless published the cash charts I had drawn over the weekend, and reiterated my stance that I felt the best fit for the pattern was for a rally to (at least) SPX 1997.
Needless to say, by Tuesday, my gut call from Friday didn't look so crazy anymore. Frankly, I was modestly surprised that I was able to triangulate any pattern at all from within the last month's chop zone, so you'll have to forgive me for that little bit of horn-tooting.
The question now, of course, is whether this rally presents the selling op I believed it would when I wrote Monday's update. The market is a dynamic mechanism, of course, so it's important that we assimilate new information as it becomes available. The one key piece of new information is that the Dow Jones Industrial Average Ordinary Mediocre Average (INDU-OMA) exceeded my rally target and made new all-time highs.
I studied the pattern in INDU last night, and after a while, I finally came to the firm conclusion that I should stop and walk away before I went insane. INDU's chart looks like it was drawn by M.C. Escher. Almost every pattern I could find not only violated rules and guidelines of Elliott Wave, but also violated the fundamental laws of physics. INDU's chart is an abomination, and I highly recommend we start a movement to burn all the INDU charts before this thing spreads to other markets.
I'm kidding of course. I found a few patterns that made sense, but they're so complicated to chart (and make understandable for public consumption) that by the time I labeled everything, it wouldn't matter, because the sun would have burned out by then, and no one would care about equities anymore.
It's interesting how often the market works its way into complex types of patterns heading into FOMC announcements, which makes sense. After all, the Fed is one of the main drivers of asset prices in what used to be known as our "free market" -- back in the day when bizarre and archaic concepts such as "productivity" and "supply and demand" impacted asset prices. The term "free market" has taken on a different meaning in recent years, and the Fed's motto since 2009 has been: "We put the FREE in Free Market."
Anyway, it's time to look at the charts, and we'll start with SPX. I am still leaning toward this being a complex flat, with some additional details in the annotations.
COMPQ failed to act as a canary for anything other than COMPQ, and with prices at current levels, doesn't do much to aid in additional clarity.
However, NYA again proved to be exceedingly helpful:
(Note typo: "botom" should read "bottom." A "botom" is not something you'd find in the market, but was instead a medieval weapon that was used to punish insolent serfs. Or it should have been, anyway.)
Big picture, not much has changed during this extended chop zone:
In conclusion, a bit more upside wouldn't be out of the question here, but I do continue to marginally prefer the idea that upside is limited at current levels, and that Friday's low will be broken reasonably soon. However, if bulls can sustain a breakout over the all-time high in SPX, then we'll have to give more weight to the idea that the chop zone was simply a consolidation period.
Do keep in mind that the market sometimes likes to head-fake near FOMC announcements, so stay very alert to reversals today. Trade safe.
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