Going back several weeks in the updates, I've been mentioning the zone around SPX 2000+/- as an inflection point, and the "zone to beat" for bears. On Monday, SPX dropped down into that zone, and bulls found support waiting there. The question bulls and bears both have now is: "Is the decline over?" Today I'll attempt to answer that question.
Okay, well, I thought about trying to build suspense here, like they do on TV ("When we come back, the answer to 'Is the decline over?'"), but that would require running a few commercials and you don't have that kind of time, so let's get right to it. The answer is: "Probably not."
For evidence, I submit Exhibit A: NDX. The basic issue discussed on the chart also applies to several other charts as well.
Exhibit B is even simpler, and is shown via the SPX chart. Keep in mind that SPX has the same options for a complex bullish (then bearish) expanded flat as NDX, using equivalent highs/lows -- but I consider the expanded flat an underdog:
In conclusion, although bulls are staging a convincing rally off the first SPX support zone, the current available evidence suggests that this bounce is probably a simple countertrend rally. As noted, next resistance is near 2050 SPX and the red trend line, so we'll see how the market reacts there and watch for impulsive turns. The expanded flat shown on NDX is technically possible, but probably a slight underdog at the moment -- nevertheless, bears probably don't want to be shorting willy-nilly (symbol: WLNL) into this rally, but should choose their entries carefully and respect their stops. Trade safe.
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