SPX, NYA, INDU: Looking Back to Look Forward

This has been, and remains, a difficult wave to count.  The most interesting fact for bears is how the market turned right at the bear inflection point that was identified more than a month ago, and how that price point has continued to contain all rally attempts.

Let's take a look at some of the market's options from here.  We'll start with the bigger picture INDU flat, which was first hypothesized nearly two months ago.  That count isn't a "done deal," by any means, but it's certainly alive and well.  Bulls still have options for a bullish fourth wave, and those options remain reasonable for the time being.

NYA also revealed the inflection point in real-time, and that point has continued to hold:

A slightly larger view of NYA:

Finally, SPX continues to amaze by following the path outlined all the way back on October 23.  More recently, there was a bit of confusion near 2093, which I believe resulted from a failed wave.  In my opinion, the wave from red (b) to red (c) is impulsive -- and therefore likely to be a rare "failed" (c)-wave. 

Just for fun, here's the original annotation from October 23 (second one down):

In conclusion, bears have kept their intermediate options open by continuing to hold the price point where the rally needed to end for the most bearish counts to stay alive.  That doesn't necessarily mean the bears win yet; it simply means the market "saw" that price point the same way I did, and is respecting the bear options.

On the other side of the coin, thus far bull have held the near term zones they need to.  All that could change today, of course -- but at this exact moment, nothing has been set in stone just yet.  This remains a difficult wave, so I would recommend neither side get complacent here.

Just for fun, my "perfect world" count would see us rally back up to retest the high again, then decline back to test the most recent relative low (either Friday's low, or a minor new low this week).  The bottom line, though, is that bulls need SPX to sustain a breakout over 2117, and more importantly, the all-time-high.  Otherwise, best case for bulls is probably a sideways grind; worst case is a significant decline.  Trade safe.

BKX: The Most Unpredictable Wave of 2015?

This market's a bit of a beast right now, and we haven't seen a move this messy and overlapping since well prior to the August flash crash.  Today we're going to look at BKX for the options, because this index has claimed both its most recent prior swing high and prior swing low, which are two things SPX has not done yet.

One point that we haven't rehashed in a while is the ongoing possibility that the rally from October to November was all part of the C-wave of a large flat.  Because BKX has NOT reclaimed its November high, which came at a key infection point (specifically: after five complete rally waves, as noted on November 9), that bearish intermediate option remains very much alive from a technical standpoint.  Therefore, this remains a significant technical inflection point in the big picture, because if that rally was simply a C-wave, BKX would be expected to break the October lows. 

Due to the nature of the near-term pattern, though, more sideways chop wouldn't be at all surprising.  In my opinion, the current wave is one of the most unpredictable waves we've seen for all of 2015, so we'll simply have to await a bit more information from the market.  Note that the options on BKX and SPX should be similar.  Trade safe.

SPX and BKX: Market May Be about to Get Even More Wild

Last update expected SPX would break 2097, and, for once, the market said (this is a direct quote): "The heck with that, Imma do something weird instead."

On BKX, I had noted the possibility for a complex flat, and that may be what's unfolding, but this pattern has options to get even weirder than shown.  Before we worry too much about that, though, let's take a look at the most "obvious" (and I use that term loosely) potential:

On SPX, things would have to shake out in a similar fashion -- if this is indeed a complex flat, of course.  There are bear options here, too, and they can't be ruled out yet.  As I mentioned on 11/25, the market still hasn't broken out over resistance, and (okay, this one IS a direct quote for real): "don't get caught looking up PAST resistance that hasn't even been tested yet.  Stick to the present and see how the market reacts."  Thus, the chart below covers the bear options in a bit more detail, at the hourly level:

Finally, the near-term chart simply shows the first informational levels, and notes that there's another way for a complex flat to fit here if 2042 breaks.

In conclusion, the market hasn't quite moved back into ambiguous territory, but it's awfully close to doing so.  The good news is that while it may not be entirely predictable from the current vantage point, there are certain tells that we know to watch for here, and if we see those tells, we'll be able to get a stronger read of the move that will follow in their wake.  In the meantime, trade safe.

SPX and BKX: "Why Yes. Yes It Is."

Last update (See: "Is the Recent Decline a Buy Op?") determined that a near-term expanded flat was the most probable pattern:

In conclusion, because of the near-term pattern in SPX, I'm very slightly inclined to think that the recent waterfall decline is actually the c-wave of an expanded flat, and therefore destined to recover...  In a perfect world, bulls would like to see SPX rally from here, and bears should stay nimble since the decline could have been a small second wave and about to launch back up.

Friday's market obliged that outlook.  It's funny how well Elliott Wave works once the market tips its hand... sometimes we have to wait for a while for that to happen, but it does happen eventually.  One of the keys to successful trading is patience, and I've always liked the following quote from the movie Rounders (which was about poker):  "Get your money in when you have the best of it; get it out when you don't." 

Patterns that provide us higher-probability reads can be likened to starting with pocket Aces in Texas Hold 'Em:  They don't guarantee you're going to win, but they do put the odds in your favor.  Patterns with no clear reads are similar to playing a starting hand such as jack-8 off-suit.  Maybe you'll get lucky and win -- but most of the time you're just handing off your money to someone who holds a better hand than you, and/or who has more discipline.

Let's get to the charts.  SPX was the "tell" on Thursday, because the subdivisions didn't fit for a bearish pattern -- and I hope I conveyed that well enough in Friday's pre-market update:

Bigger picture, SPX could still make things difficult for everyone:

BKX already broke its prior swing high.  Although its options are the same as SPX, I'm continuing to track it as something of a "compare and contrast" litmus test against SPX.  If one or the other starts diverging, it might clue us in early to the market's next intentions:

In conclusion, the near-term waves were clear on Thursday night and allowed the read for a "launch back up."  At this juncture, though, the market does have a couple options.  At the minimum, I would expect SPX to break 2097 from here, but at that point, we do have to stay alert to the potential for an even more complex flat.  Trade safe.

SPX, BKX, RUT: Is The Recent Decline a Buy Op?

Last update talked about the potential for a complex expanded flat C-wave decline, and the market has decided to make this as complex as it can.

Let's start with BKX -- last update I stated:  "It's tough to find a pattern that doesn't ultimately exceed 76.68."  BKX exceeded that level shortly thereafter, which (perhaps ironically), gives the pattern more bear potential that it had on Wednesday:

RUT met with rejection perfectly off the noted resistance level. 

Finally, SPX might be the clearest index here:

In conclusion, because of the near-term pattern in SPX, I'm very slightly inclined to think that the recent waterfall decline is actually the c-wave of an expanded flat, and therefore destined to recover.  If SPX sustains trade south of 2019, that would at least remove some of the bull options, but not all the bull options, since the whole decline could still be a c-wave at one higher degree.  In a perfect world, bulls would like to see SPX rally from here, and bears should stay nimble since the decline could have been a small second wave and about to launch back up.  Below 2019 and we'll have to at least consider more bearish options.  Trade safe.

BKX, SPX, RUT: Third Time's a Charm

Last update concluded: "While the market still hasn't cleared resistance, there's not much in the charts that appears terribly bearish at the moment."  Since then, SPX has rallied higher, through its first minor resistance zone.  The pattern into the high is presently very choppy, which either means we're about to launch higher, or that we're going to back and fill and then head higher.

While there are some solid options for a short-term top, it's tough to find a near-term pattern that argues for a meaningful top just yet.  Best case for bears says we probably have to chop sideways up first.  Best case for bulls says we're about to head off to the races again. We'll start with BKX to understand why:

SPX has similar options:

RUT shows that we've now officially tested the broken blue trend line for the third time.  "Third time's a charm," as they say in the charm-making industry, where they always commemorate the third instance of everything by crafting a low-quality charm-bracelet charm out of a mixture of copper and nickle.  These "everything that has ever happened three or more times" charms can be purchased on eBay for 99 cents or less, including free shipping via an "ePacket from China."  Although, they won't tell you the charm is made of copper and nickle; in fact, the new RUT Charm is being advertised as "14K Solid rolled Gold plated, with Genuine simulated Earth-mined synthetic Natural Diamonds!"  (Sorry for the random digression:  I've been doing some Christmas shopping on eBay, so I've learned to carefully read the "item description" a minimum of 17 times before bidding, because the auction title is often VERY misleading.)

In conclusion, some near-term chop wouldn't be at all surprising, but we presently have no indication that any kind of "final top" is in place, and the trend still appears to be up for the time being.  As noted last update, we'll continue watching for any signs of a turn in the form of an impulsive decline -- but while I'm cognizant of resistance here, I'm not really "top hunting," for reasons I've outlined over the past few updates.  The RUT pattern does bear watching, because we have a very similar fractal from about a year ago, and RUT is testing several layers of long-term resistance, so we'll see how the market reacts.  Trade safe.

SPX, BKX, RUT: Market Continues to Challenge Resistance

Last update noted that some concrete potentials were emerging from the muck, and, indeed, there has been at least one event of significance since last update:  RUT broke above 1200.  This is significant because the market is beginning to rule out at least some of the IT bear potentials.  Let's jump right into the charts, starting with RUT's 30 minute chart:

Bigger picture, RUT is now in the process of testing the broken long-term uptrend line for the third time.  This may be one time too many for bears, as one rarely sees three tests of a broken trend line if that trend break were to indicate that the trend has changed.  One or two tests is more common -- when you get three, it sometimes indicates that the market is going to barrel its way right back into that previous trend (in this case: up).  And if you get a fourth test, then it's usually a sign the the primary trend is about to resume.  We'll see what happens next, and watch for any signs that contradict the above theory.

Since the November 25 update, BKX has proved that the impulsive interpretation of the final near-term wave was correct:

Finally, SPX hasn't done anything since last update, but has been consolidating beneath resistance:

In conclusion, SPX remains below prior resistance, but RUT is attempting a breakout through the 1200 level.  While the market still hasn't cleared resistance, there's not much in the charts that appears terribly bearish at the moment.  Until we begin to see impulsive declines, the "threat" of resistance is really the only thing bears have in their favor.  Trade safe.