SPX and RUT Updates

Last update expected that over the near-term, another small leg down was expected, with Target 2 being 2077.  SPX captured that target (low 2076.31), but left itself options for additional downside.  The question is whether any pending additional downside will simply become a fourth wave at micro degree:

Since the current wave structure is about as clear as mud filled with resin and covered in tar, I've drawn up a simple near-term support and resistance chart:

Bigger picture, RUT is testing its 200 day moving average, and its intermediate downtrend line:

The biggest concern I have for bears is the stair-step pattern that RUT just went through.  There's still a shot that pattern is a terminal, but it could instead be a coiling pattern.  We won't know for certain until it moves a bit farther, but just be aware that if it's a coiling pattern, a breakout could take aim at the 1194-1206 zone.

In conclusion, this remains a difficult market to chart, and frankly, it's always something of a drag dealing with these waves that seem driven more by central banks than by actual humans.  (Not that I'm suggesting for one minute that central bankers aren't human -- wait, scratch that.)  Thus far, the small handful of semi-promising bear moves have each ultimately stalled at three waves down, and then culminated in new highs -- so at this point, it gets difficult to say anything other than, "Well, it's still an uptrend!"  As noted, though RUT is testing intermediate resistance.  On SPX, the first semi-meaningful zone for bears to claim in 2060.  Trade safe. 

SPX Update

A week ago I wrote:

In conclusion, INDU's decline is impulsive, although NYA shows how that impulsive decline could be a bullish C-wave.  SPX is trying to look like a completed ABC decline.  Everything in the pattern is designed to make bulls more bullish and to scare away bears -- but, for whatever reason, I'm not buying it.  Maybe I'm wrong, and we'll rally straight on to new highs; this is a very tricky pattern, because it does "look" bullish on the surface -- so, for that reason, I'd suggest only low-risk entries for bears who are inclined to trade against it.  Trading, at its essence, boils down to calculated risks, and not all of them will win; thus it's important to consider the other side of the trade, and to keep losses manageable. 

It turns out that the pattern was exactly what it appeared to be (an ABC decline), and I was indeed wrong not to buy it (both literally and figuratively).  On the plus side, at least I had the decency to warn bears not to get too aggressive.  This is certainly not the first time I've been had by one of these Central Bank-driven "we're going to break all the records!" rallies.  As the saying goes:  This is not your father's market.  It might be more akin to your grandfather's market, assuming your grandfather was around during the roaring 20's.


Last update, I noted that if SPX could sustain a breakout over 2075, then it suggested a first target of 2090 +/-, which was captured yesterday (within two SPX points falls into the +/- category).  On the chart below, I'm showing SPX in bull (5), but be aware that there's no way to rule out a extended wave yet, so it could run toward Target 2 if it wants.

On Monday, I had discussed BKX as a possible canary in the coalmine, and mentioned that a breakout could be dangerous for bears.  BKX has since broken out, but we'll give it a session or two to see if that sticks.  If it does stick, then bears might want to stand aside until such time as the market declares them back in the game, because that pattern has the potential to be quite bullish on an intermediate basis.  The last bear patterns there are double-zigzags and such, which are never obvious while they're forming, so bears will just have to be patient for the time being.

I've drawn up a near-term chart based on the current 1-minute pattern, with caveats as written.  If we do get the move as shown, it does have the potential to mark blue c for a small fourth wave.  If it develops into a five wave decline (beyond blue c), then we'll know to watch for a bigger turn.

Incidentally, if we sustain a breakdown directly without a whipsaw, then this pattern has the potential to be more bearish than shown.  The simple version is that yesterday's decline does appear impulsive, so more downside is expected, either after the chop as shown, or more directly.

In conclusion, the breakout in BKX has the potential to be bullish if it sticks, so we'll keep a close eye on that heading forward.  Trade safe.

SPX and INDU: Clear Battle Lines

Last update didn't have much in the way of predictions, but shortly after Monday's open, the market revealed its near-term intentions, so at 10:56 New York time, I posted in our forums that I thought SPX might head down to 2038-40, then reverse back up to 2064-67.  That's exactly what happened on Tuesday, so hopefully forum members were able to benefit from that roughly 40-point round-trip call.

If the market breaks out, the near-term pattern will become a little iffy for bears.  I can still see one bear pattern (detailed on INDU's chart), but bears need a fairly immediate reversal for that to stand a chance.  Let's start with SPX in broad strokes, then we'll look at INDU for detail:

INDU's chart contains some additional details, along with some random notes for edumacayshunal porpoises (= really smart sea-dwelling mammals who can't spell):

In conclusion, the market has drawn the battle lines fairly clearly, so the next move will likely have at least some near-term legs in the direction of the break.  Trade safe.

SPX, INDU, BKX: A Canary in the Coal Mine?

Well, there's been no material change since last update, but I do have a new chart for us to keep an eye on (or: "for on an eye us to keep," since you're not supposed to end a sentence with a preposition).  Let's get straight to the charts, starting with INDU.  On Friday, INDU turned right about where I had the 2/b label, but another leg up to complete 2/b still isn't entirely out of the question.  Of course, a breakout over recent highs would take wave 2 (but not b) off the table.

SPX also turned where I had its 2/b label:

Finally, the chart for us to watch is BKX.  In the event BKX were to break out over its recent highs, it wouldn't entirely eliminate all the bear options, but it would certainly call for a healthy dose of bear caution (the FDA considers 200 mg to be a "healthy" dose of caution.  400 mg or more will put you to sleep, but 50 mg or less will tend to blow up your account in about 3 weeks, so dose carefully.  Maybe take a healthy dose of caution before dosing?  Ah, Catch 22!)

In conclusion, there's no material change since last update, so it's simply up to the market now to prove the bears/bulls right/wrong.  Trade safe.

SPX, NYA, INDU: Market Doing Its Best to "Sell" the Bull Case

Last update suggested there was "more downside to come," and yesterday indeed saw a second leg down to new lows.  The near-term picture gets a little tricky again now, because, as we'll see on the charts, the market has left itself the option for this to be a completed corrective decline.  That said, I'm not inclined to favor that -- although I can't give readers a technical reason for that suspicion.  Thus I've outlined the bull and bear options on the upcoming charts, and the levels that reveal which is correct.

Let's start with NYA, because it really went out of its way to build itself into the shape of the exact bull pattern that I warned about on Wednesday (an ending diagonal c-wave).  The option for a diagonal was revealed by the technical price structure that was already visible as of Tuesday's close, so the fact that NYA went on to seemingly-complete that exact pattern does give me pause for the bear case, but I'm still favoring it unless the market can sustain a breakout.

Essentially, even though the market revealed its "diagonal intentions" on Tuesday, then went on to complete that pattern on Wednesday and Thursday, I'm still modestly inclined to believe that pattern is a fake.  So: either I'm being stubborn, or my subconscious is picking up on something in the pattern that's tipping the market's hand toward the bears (even though I can't quite put my finger on it)... we'll know soon enough!

Next is INDU -- same deal here:

Finally, SPX:

In conclusion, INDU's decline is impulsive, although NYA shows how that impulsive decline could be a bullish C-wave.  SPX is trying to look like a completed ABC decline.  Everything in the pattern is designed to make bulls more bullish and to scare away bears -- but, for whatever reason, I'm not buying it.  Maybe I'm wrong, and we'll rally straight on to new highs; this is a very tricky pattern, because it does "look" bullish on the surface -- so, for that reason, I'd suggest only low-risk entries for bears who are inclined to trade against it.  Trading, at its essence, boils down to calculated risks, and not all of them will win; thus it's important to consider the other side of the trade, and to keep losses manageable.  Trade safe. 

SPX, NYA, INDU: More Downside to Come?

Monday and Tuesday made for interesting sessions, inasmuch as we finally had a truly clean, complete-looking five wave rally into Friday's close, and Monday and Tuesday saw the rally stall and reverse.  A week ago, I wrote that we were finally into price territory where I was willing to commit to the assumption that "the top is closer than the bottom," and I'm sticking to that call until such time as the market suggests otherwise.

Incidentally, a week prior to that (on March 23), I warned that the rally was likely running out of steam and that the market was entering chop zone territory.  SPX had closed at 2049.80 when I wrote that warning... and here we are two full weeks later with price only having moved a net of -4 points (yesterday closed at 2045.17), so I believe we can put that call in the "plus column."

So what next?

Well, combined with the warning indicators I've discussed over the past couple weeks, we do finally have a potentially-complete five-wave rally structure (as noted Monday) -- and, perhaps more importantly, we have a downward reversal after the apparent fifth wave completed.  While we don't yet have a large impulsive decline, the wave structure does suggest that the downward wave is incomplete, so a larger decline wave could yet materialize. 

Overall, we have mounting evidence that the trend may finally be turning back toward the bears' favor.

Let's take a look at the charts, starting with SPX.  Presuming we're dealing with at least an ABC down, then 2000-2010 is reasonable.  This next statement is a little ahead of the near-term structure (which hasn't confirmed a larger impulsive decline), but if we just saw the end of the preferred intermediate count's C-wave, then the next target is south of 1810.

Next is INDU, which, unlike SPX, has broken both its uptrend lines:

Finally, NYA is the one potential fly in the ointment for bears, in that it did not provide a clear top.  The top in NYA is muddy because it could be a b-wave -- but if it is, then it is either building an ending diagonal for the C-wave (we'd know this because it would bottom directly), or gearing up for a significant C-wave decline.  I'm more inclined to think it's the latter IF this is a c-wave decline (as opposed to the start of a new impulsive decline).

The short version of all that:  If NYA fails to bottom fairly directly, then even the bullish count suggests a decent decline before it's all said and done.

In conclusion, while we don't yet have confirmation of a larger turn, the evidence continues mounting in favor of the bear case.  Barring an almost-immediate reversal (to complete a bullish diagonal in NYA), we're likely to head lower over the coming sessions.  Trade safe.

SPX, INDU Updates: A Bit of Elliott Wave Edumacashun

Last update covered the near-term key bearish overlaps in considerable detail -- but on Friday, neither SPX nor INDU overlapped their key levels, which kept the uptrend intact for the time being.  After re-reading Friday's update, I was a little bugged with myself for not explaining WHY I had those levels as key overlaps (and thus why I had the alternate count as a b-wave into the high) because it probably would have been helpful to readers who are not well-versed in Elliott Wave.

I sometimes forget to explain information that I take for granted -- and odds are good that I'll do that again at some point -- so I'm going to provide a few educational paragraphs now so that readers have the benefit of this knowledge for the NEXT time I forget to detail a 1-4 overlap.

Let's go back to Friday's INDU chart for educational purposes (first chart, directly below).  On this chart, we can see that, leading into the recent highs, I have red 1 and red 2 labeled... but no red 3, 4, and 5.  We can also see the black "alt: b" at the peak.  There are no red 3, 4, and 5 because I didn't see those subdivisions present in the wave structure -- so I presumed that one of the following must be true:

1.  I had missed red 4, and it was hidden in the wave structure;
2.  Or we only had 3-waves into the high -- no 4th or 5th wave would indicate a b-wave high (b-waves are 3 wave moves), hence the "alt: b."
3.  Or red 4 was still unfolding, with red 5 to come.

Options 2 and 3 were the reason I focused on the key overlaps as the "first step for bears" and suggested readers watch those levels closely:  A key overlap at the red 1 peak would have eliminated option 3 above and thus left only options 1 and 2 in play.  This is such a basic tenet of Elliott Wave (wave 4 cannot overlap the price territory of wave 1) that I often fail to even mention it, but I should probably have discussed option 3 in more detail, because knowledge of that rule provided a low-risk long entry for anyone who was willing to treat the opening decline as part of a fourth wave.

(Incidentally, the above options detail part of the value of Elliott Wave: It allows you to build logic-driven market models -- by identifying the key levels that act as lines of demarcation between bull and bear waves, you can develop "if/then" statements for a move.)

Now let's take a look at the updated chart:

In my opinion, bears should probably be glad that the wave made a new high, because if Friday HAD overlapped the key levels, then we'd have been faced with the specter of a b-wave into the high (b-wave highs/lows are never the final wave in a move, and indicate that said high/low will be broken in the future).

SPX also held its key overlap:

Interestingly, NYA did NOT hold its key overlap, but it also did not make a new high.  There are thus several options on the table for NYA, including the possibility of an ending diagonal -- but it also leaves open the potential for a bunch of garbage moves over the coming sessions, so I'm going to give it another session or two to allow me to eliminate some of the many options there.

In conclusion, SPX and INDU both held their key overlaps, so bears are still in limbo.  It now appears there are finally enough waves in place for a complete rally, but there's nothing yet to rule out options such as a fifth wave extension, etc., so "enough waves" does not necessarily guarantee an immediate end to a move.  From a near-term perspective, we still have no impulsive declines, or anything indicating a concrete turn.  Trade safe.