Last update noted that most markets had reached their first upside targets/inflection zones and the market has since stalled. We'll start with INDU, which captured dead-center of its first target zone:
SPX next, which remains stalled at its red resistance line:
And finally, two looks at COMPQ, staring with the near-term, where we can see another wave down would make for five waves down:
And then COMPQ's bigger picture, which suggests lower prices would break the long-term uptrend:
In conclusion, if bears can sustain trade and closes below this month's low, it would suggest two main options:
- --As seen on COMPQ, that new low could be a fifth wave, which (in its most bullish form) wouldn't be devastating, just scary (see blue (5)). If it were to extend, it could be devastating.
- --In SPX, the new low (if it occurs) could be either a small fifth, or the start of a LARGER DEGREE third wave. If it were the latter, it could, again, be quite devastating.
- --So, the moral of the story is, bulls should be VERY CAUTIOUS in the event of sustained trade and closes below the monthly low. Yes, it could bounce shortly thereafter (in the event of the fifth wave mentioned at the start)... but it would have the potential to become a relentless decline, in the event of the third wave or extended fifth.
All that said, the first thing bears need to do is BREAK that low. And while that's looking "possible" right now, it's absolutely not a given yet. So: the flip side of the coin is that bears should be very cautious in the event that the market sustains trade north of this week's high.
Trade safe.
p.s.-- I'm continuing to aggregate -- and add new material -- at Substack:
(This one was pretty popular upon original release. If you remember it from its original 2013 release, then you're officially an "old timer" 'round these here parts.)
Three psychological traps that quietly sabotage everyone -- and how to break free before they break you.
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