SPX and NYA: Salvation Reduction Act

So the Senate has passed the comically-named "Inflation Reduction Act," which pumps another $430 billion in cash (that the government doesn't have) into circulation -- which leads one to wonder why there are no "truth in advertising" laws that the government must abide by.  If a company tried to sell gasoline as "Fire Reduction Liquid," they would be sued into oblivion.  And rightly so.  Yet our own government can name things the exact opposite of what they are -- and of course there are no laws against this, because that very same government makes the laws.  The same company selling gas as "Fire Reduction Liquid" writes the laws that say, hey, it's okay to do that if they want.  Which they do.  And no, you cannot sue them either, you low-life voter.  Now stop questioning authority, return to your pod, and eat your low-CO2 bugs like a Good Citizen.

To be fair, this new spending bill will also help cool the economy by killing jobs and lowering wages via higher corporate taxes, so it may end up being a wash on the inflation front, and the Congressional Budget Office suggests the bill will, at best, impact inflation by one-tenth of one percent -- but they're not sure whether that change will be up or down. What a time to be alive.

Anyway, I digress, and that's enough government-craziness for one day.  Let's look at some charts.

Since last update, SPX encountered resistance at the prior high (as mentioned last update), but so far has only declined to test the bottom of the purple channel:

NYA is still below its "textbook" target:

In conclusion, there really isn't too much to add to the last few updates, as SPX has been range-bound.  It is again worth mentioning that, so far, bulls have managed to hold the breakout and until there's a whipsaw, bears might want to remain near-term cautious.  Trade safe.

SPX and NYA Updates

John Maynard Keynes famously said, "The market can remain irrational longer than you can remain solvent."  (My take on that is:  "The market can remain insolvent longer than you can remain rational.")

The simple fact is, markets are not rational, as everyone knows deep down -- they are often driven by emotion; specifically, the emotions of fear and greed.  At least, that's the commonly accepted wisdom.  I think "fear and greed" are an oversimplification of more complex forces, but I agree that emotion plays a big part, as any trader knows (given that they've experienced many an emotion themselves while trading!).

On Friday, everything "seemed," on a rational level, to be set up for a fall, but the market was having none of it, and instead found buyers at the black trend line that I discussed in the last update:

Zoomed-out, we see the same trend line again, and the current wave is starting to have the psychology of a second wave:  During second waves, many people assume the bear market is over and there's great hope that the worst has passed and things are returning to "normal."  (That we were about to enter a second wave was my first instinct back on 6/24 and 6/27 (before BKX threw me for a loop), as the annotations from those dates show.)

From a technical standpoint, it could still be either a fourth or a second (red 1 is the dividing line).

NYA is still below its "textbook" target zone:

We have to remember that bear markets do not head "straight to zero" and, as I've talked about several times previously, this (presumed) bear is expected to unfold over years -- which means there are going to be many decent bounces along the way.  Which, really, is the way even bears should want it, because it's hard to make money as a bear if you're never given any short ops.  

In conclusion, SPX managed to hold the zone it needed to hold, so we'll see if bulls can get (and hold) back above the recent highs (sometimes trend lines act as support/resistance, but then the market encounters resistance/support again near the prior high/low and the trend line is tested a second time (and possibly broken)). Trade safe.

SPX, TLT, BKX: Might as Well Face It, You're Addicted to Liquidity

This morning, bulls are being reminded that maybe they shouldn't have stayed up all week partying, as the Non-Farm Payroll Report came in at double the expectation.  This suggests the Fed can keep raising rates at its current pace without so much as a worry or a second thought.  Which, of course, means liquidity will continued to tighten -- which in turn means less money to throw around the stock market.

As we talked about last week, if "bad news is good" for the market, then this good news is bad.  It all comes down to Fed liquidity, especially for a market that has been addicted to it since at least 2009.  

Chart-wise, SPX managed to peek above black, but the back-test always determines whether such a move is a head-fake or the real thing:

TLT is interesting here:

And BKX remains in the same place, and is still the "hmm, maybe we shouldn't open the champagne yet" in the bulls' near-term party:

In conclusion, no real change from the last few updates.  The futures market sold off sharply on the NFP report, but bears do need to turn this into an impulse down.  If bulls hold it to an ABC down, then they may keep the party going a little bit longer.  Trade safe.

SPX and BKX: Inflection Zone

Last update discussed a (presumed) trend channel, and SPX has now reacted to that channel, so that's as close to "confirmation" [of a theoretical line drawn on a chart] that it gets in this biz.  

This leaves both options (fourth wave vs. second wave) on the table for now -- in other words, the current zone, stretching up to the bottom of Red 1, is an inflection zone where bears could reverse things:

No change to BKX, which remains a possible thorn for bulls:

In conclusion, the market is into a zone where a reversal could occur -- IF this is a fourth wave.  As I noted last update, it's somewhat unclear whether the current wave is a fourth or a larger second (which could run beyond the bottom of Red 1), but in either case, I want to reiterate that I remain long-term bearish -- so, regardless of whether this bounce is 4 or 2, I presently believe this is still a bear market (in case anyone had any impressions to the contrary).  In fact, until the bottom of Red 1 is overlapped, there's really no reason to give any significant consideration to larger bull options (at least as far as the technicals go).  Trade safe.

SPX, BKX, NYA Updates

I'm just going to be forthright here:  I'm not too pleased with myself right now.  Here's how I got here:  Back in June, I thought I saw this rally coming and I wrote about that (on June 27) -- the problem was, that was largely based on gut instinct (which can be hard to trust in the face of seemingly-contradictory evidence), so in July, when BKX made a low that looked like three waves (as did NYA), I threw my instinct out the window in favor of what appeared to be hard chart evidence.  I wrote off my first read in favor of the new read, and I believe now that was a mistake.  

My apologies for that error.

So is this a fourth wave or a second wave?  I genuinely don't know.  As of this moment, it could still be either; the chart explains the dividing line:

BKX is still a pain for all involved, and no change here:

I noted back on July 22 that in the event the current wave were to extend, then SPX 4200-35 would be a target.  Given BKX, I thought that unlikely at the time, but now -- who knows.  NYA says that it's at least possible:

So, with the wave counts up in the air, I often like to return to basics.  Below is a simple trend line/channel chart:

The irony is that as I write this, futures are down 26 points, so maybe there will be a significant reaction to the black trend line on the chart above, and we'll all have a good laugh about this later.  

In conclusion, SPX is in a sort of no-man's-land right now, where a fourth wave or second wave are both still on the table.  All I can do from here is try to take it as it comes.  Trade safe.

SPX and BKX: Bad News is Good Again

So it appears the market has reverted to "bad news is good" mode, with investors jumping in on the hope that crummy econ data will cause the Fed to slow down -- of course, that line of thinking relies upon a number of questionable presuppositions:

1. It presupposes that the Fed has near-complete control over the market.
2. It presupposes that if the Fed slows down, then the bull market will return -- despite the fact that the prior bull market was not supported by a "slowing/neutral Fed," it was supported and driven by a Fed that had both feet on the liquidity accelerator.  
3. It presupposes that bad econ data will fix inflation, thus allowing the Fed off the hook.
4. It presupposes that everything else in the world goes swimmingly -- which means, among other things, that Russia will simply back down, oil will suddenly flow abundantly again, and our Vaunted Leaders will stop (seemingly) actively working to destroy America and the American people.
5. It essentially presupposes that "good times are here again, just as long as that pesky Fed doesn't ruin everything!"  Which is kind of laughably naive, when you think about it.

But hey, if the market were rational, then we wouldn't need a market in the first place.  We could just plug-in a complex mathematical formula to determine the prices of everything, and then we could go back to watching Netflix, which would only cost 8 cents per month (see how perfectly this formula works?).

Chart-wise, SPX has now sneaked above the red line and is flirting with the 38 Fib:

While BKX is still a thorn in my analytical side:

In conclusion, last update noted:  

Nevertheless, in the event of a breakout, there is potential resistance not far above, in the 4085-4100 zone.

And futures are into that zone now, so we'll see how the market reacts to it, then take it from there.  In SPX, the current rally is still just three waves up and not yet a larger impulse, so it is still a corrective form -- for now.  Trade safe.

SPX, BKX, COMPQ, INDU Updates: Top Looks Closer than the Bottom

Last update expected lower prices, and the market obliged, but futures are indicating a gap up that retraces some of the decline, so they're not going to make it simple (as usual).  Let's start by taking a look at the Dow Jones Industrial Average (INDU), though, which suggests that a gap up might end up being sold:

I haven't updated anything on the SPX chart below, because Stockcharts is still deleting my annotations and making me redo all of them (part of the New Cruelty at Stockcharts), but the only things I would add are that:

1.  SPX overlapped the black A/1 high, which is generally not bullish

2.  Nevertheless, in the event of a breakout, there is potential resistance not far above, in the 4085-4100 zone:

Not much to add in BKX:

COMPQ is backtesting/flirting with possible overhead resistance:

While the SPX intermediate chart suggests that even if there is a breakout over the ~4012 high, the market is going to run into red resistance again, just above that high (since that's a rising trend line):

In conclusion, today is a Fed day, so the market usually finds a way to kill time until the announcement.  Given the larger pattern in BKX, I continue to lean toward the idea that the final low isn't in for this wave yet -- the question seems to be more whether the high is in yet.  I suspect it's either in, or it's reasonably close (as noted on Monday, several markets, including SPX, could support another smallish wave up).  Of course, we have to know the flip side of the coin, and in the event SPX were to sustain a breakout over the 4100 zone on increasing momentum, then I'd need to reassess.  Trade safe.