SPX, INDU, COMPQ: Bears Off to a Good Start

 Last update concluded:

...multiple markets have tagged potential resistance zones concurrently, and that may cause a negative reaction. 

In other words, if bears are going to show up again, this is as good a time as any for that to happen. Maybe even better.

And bears have indeed finally shown up again.  Let's dive into the charts and resume the discussion after that, starting with INDU:

SPX looks very similar:

From a trend line perspective, SPX is on the verge of breaking down from the purple melt-up channel:

NYA was rejected on its test of the noted black trend line:

Nothing added to the SPX intermediate chart yet:

And nothing added to the COMPQ intermediate chart yet:

In conclusion, on the first two charts, we can see that bears have formed a small impulse down (blue 1/A), but still have work to do in order to create a larger impulsive turn, which is what's required in order to suggest a larger trend change.  I'm leaning toward the idea that they will (and that we've about seen the end of this bear market rally), but that's just a pure hunch, so take it with a grain of salt -- from an objective scientific standpoint, it's too early to say whether or not this decline will become impulsive.  Also, although futures are suggesting a gap down open, be aware that there is an option for a less direct route than shown on the first two charts, in the form of an immediate rally back up toward 4287-4300, which could then be followed by a renewed decline later today or Monday.  Trade safe.

SPX, COMPQ, NYA, TLT: As Good a Time as Any

Since last update, SPX rallied up to tag the trend line we discussed:

Now, what's interesting is how things seem to be lining up across several markets, starting with COMPQ:

NYA also tagged a trend line that has been relevant to that market in the past:

And remember TLT, which I noted a couple weeks ago?

Interesting how that trend line above lines up with the 200-month MA on the 10-year yield:

No change to the big picture, and I still believe this is a bear market rally:

In conclusion, multiple markets have tagged potential resistance zones concurrently, and that may cause a negative reaction.  It's interesting how these all line up not only with each other, but also with the release of the Fed minutes today.  Treasury (smart money) yields began rising a couple weeks ago, when TLT tagged the trend line noted in the 4th chart on August 5, but the market (dumb money) has ignored that so far, in hopes that the Fed will decide that the 8.5% inflation of July is just so much better than 9.1% inflation (from June) that we can happily resume the free-money-party of the past decade-plus.  Which seems like a silly thing to hope for.

In other words, if bears are going to show up again, this is as good a time as any for that to happen.  Maybe even better.  Trade safe.

SPX Update, and a Deadhead Sticker on a Cadillac

Last update discussed that the current rally is correcting the entire decline from the all-time high, and thus of the same wave degree as the first leg down.  On Friday, SPX rallied again, but did close near a zone that, based on the structure of the prior decline wave, could provide horizontal resistance, so we'll see how it reacts to that.  Looking at the trend picture, the first thing bears need to do is break the rally channel:

Bigger picture, Friday's high was between the 50 and 61.8 Fibs:

In conclusion, there's not much to add to Friday's update beyond that.

On a lighter note:  Yesterday, I ended up behind a car that had a "Who Is John Galt?" license plate frame -- what made me laugh out loud was that the car was a Toyota Prius hybrid.  This struck me as the near-perfect inverse of Don Henley's famous line: "Out on the road today, I saw a Deadhead sticker on a Cadillac."  Two symbols that tacitly represent ideologies that don't really mesh together.

Anyway, that's all I've got for today.  Trade safe!

SPX and NYA: Big Question Finally Answered

Since last update, SPX captured and exceeded the 4200-35 extension target, which suggests that the current rally is a high-degree second wave that is correcting the entire bear market to date.  This in turn allows us to form some educated projections about the length of the next leg down.  

What it does not do (yet) is tell us the form that the current Wave 2 rally will take.  The rally is presently three waves up, which is "enough" structure for it to complete soon -- however, it is entirely possible that we're only witnessing a portion of a still larger fractal, meaning that the three up could become five up, which would then mark a larger Wave A of 2, to be followed by B-down and a similar-sized C up.  As noted previously, bears might want to await an impulsive turn (or otherwise low-risk entry) for this reason.

NYA has captured its "textbook" target:

The SPX trend line chart shows that SPX is currently whipping and sawing around the red horizontal; how it ultimately resolves here may offer some near-term clues.

In conclusion, the good news is that we now have a definitive answer to the "is this wave 2 or wave 4?" question, and we're able to form some downside projections for the next wave based on that.  What is not yet clear, however, is whether the wave is closing in on completion or not.  Also, if you're a bull, you take this as a signal that the bear market is over.  I'm not a bull here, but just throwing it out there for those who are and were waiting for a clear signal.  Trade safe.

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.