SPX Update: Market Rejected from Noted Inflection Zone

Last update indicated 4100-4121 as a possible inflection zone that could complete the rally, and the market was strongly rejected from that zone.  In fact, INDU has already made a new low:

As I see it, SPX basically has two possibilities:  Collapse now or collapse later.

On this next chart, SPX topped directly on last update's first "2/B?" label, so I had to move it up slightly so it wouldn't be covering the peak:

In conclusion, the market does have the option for a complex correction here, but I continue to believe, as I have since August 19, that the top is in.  Be aware that the most bearish potential here is for us now to already be within a nested third wave -- and nested third waves are often "waterfall" or outright "crash" territory, so bulls should be exceptionally cautious heading forward.  Trade safe.

SPX Update: No Material Change

Not much to add since last update, so let's get right into the charts:

From a wave perspective, this could still be a second wave or a lower degree fourth wave (the fourth wave stays on the table until SPX price overlaps the thick black horizontal on the chart below).

In conclusion, last update noted that if SPX could sustain a breakout of the purple channel (first chart), then 4100ish would be next resistance, and futures have already reached the cash equivalent zone, which stretches up to about 4121, so we'll see if this area offers any resistance.  Trade safe.

SPX Update: Bounce

Last update speculated that the market was in "bounce or break territory," and bounce it did, holding the support zone we'd discussed several times prior.  This creates an interesting structure wherein the current bounce could either be a large, higher-degree 2/B, or a small, lower-degree fourth wave:

On the chart above, for ease of viewing, I simply labeled both options as "2/B?"  The following chart helps illustrate how it might play if it's the lower "2/B?" on the above chart:

Now, again, please keep in mind that the above is not a "prediction" per se, it's simply one path the market could take if the current bounce is a low-degree fourth wave.  If SPX sustains a breakout over the purple trend line, then the red horizontal may come into play next, and the rally could go on to later form two legs up.

In conclusion, bulls did manage a bounce from support, but whether this is to be short-lived, or a larger corrective rally, remains to be seen.  We'll see how bulls manage the upcoming resistance zones.  Trade safe.

SPX Update: Bounce or Break Territory

Last update speculated that there was at least a chance bulls might put together a bounce, but also noted that the onus was on bulls to prove that with a sustained breakout over the black trend line.  There was no sustained breakout, and SPX dropped back down to prior near-term support:

This means it's unclear if SPX is intent on following the extended fifth path we've previously discussed, but if SPX were to sustain a breakdown of the noted levels, then that path would remain very much on the table:

In conclusion, SPX's intentions are unclear -- as I noted back on 9/2, the red trend line (first chart, 2nd annotation) was something of an inflection zone... and as of Tuesday's close, SPX is sitting right on that inflection zone.  So this is "bounce or break" territory, but if bulls can't get it together here, then a sustained break could take SPX down to the next noted zones.  Trade safe.

SPX and TLT Update: Next Downside Zone Captured

Last update called out the 3900 zone on one chart and a rising trendline on another, both indicated as targets and potential support zones; time and price coincided on Thursday, as the 3900 zone and the trend line were both reached concurrently, leading to a bounce.

We can see on the chart below that the next hurdle for bulls is the falling black channel line:

On the short-term chart, I've sketched in a path, but that should be considered highly-speculative at this point, as if bulls fail to clear black (on the chart above), the decline could resume in full swing:

Interesting to note that TLT has reached a potential support area:

No change to the big picture:

In conclusion, last update's downside target/inflection zone was captured -- now it's up to bulls to prove they have enough firepower to generate a tradeable bounce.  If Thursday's low were to fail, then the falling blue trendline on the first chart would be on the table for the near-term.  Trade safe.

SPX Update: Still on Track, and a Brief Word on Bear Markets

 Last update expected SPX would test the falling black trend line, which it did, and also warned:

On the above chart, I noted that this is PRESUMED to be a fifth wave -- one of the tricky things during bear markets is that surprises come to the downside, and there is no law that says the current wave needs to complete in a "typical, usual, average" fashion. If it were to behave in the "typical" way, the black trend line (+/- a little) on the chart below would represent a logical spot for wave 5 to end and thus to wrap up the larger wave 1 down, leading to a wave 2 bounce. But I cannot stress enough that it does not "need" to do this, fifth waves can always extend, especially in bear markets.

On Monday, SPX indeed tested black, bounced, and then gapped beneath it on Tuesday.  It's highly important for traders, and for us, to stay ahead of the curve, and part of the way we're staying ahead of the masses is by simply recognizing that this is now a bear market.  And part of what "bear market" means is that support is going to fail routinely.  As my friend Lee Adler has said: "There's no such thing as support in a bear market."  I recommend taking those words to heart.  

As I've mentioned for most of 2022, this is no longer the environment of the past 13 years, where "buy the dip" used to work on automatic.  The environment has fundamentally changed to one of "sell the rip."  It's the polar inverse of the past 13 years, and one of the things that's so dangerous in bear markets is that by the time all those years of "buy the dip" conditioning have finally, truly been beat out of most people, the bear market is closing in on a big rally (where, ironically, buy the dip would work again).  But it usually doesn't happen before then.

Countertrend trading in most markets is only recommended for experienced and highly nimble traders, and this becomes doubly true during bear markets, because bear markets are completely unforgiving of poorly-timed longs.  It helps to remember that the goal of the market now is to separate longs from their money -- and then, once you've come to terms with that, ask yourself if you want to throw your lot in with them by trying to beat the primary trend for a few quick short-term scores.  If you're nimble and experienced, you may be able to do it; bear market rallies are fast and powerful, and there's lots of money to be made in them -- but those types of rallies are also few and far between, and typically only arrive after large wipeout declines, when the pundits are only able to manage vacant stares... so please choose your battles very carefully.

Please don't recognize the bear and then get wiped out by trying to be a bull.

Anyway, let's look at some charts, starting with the SPX trend line chart:

Near-term, this is still presumed (as in last update, I use that word quite intentionally; the most bearish case would be a deeply-nested third wave) to be a fifth wave:

Big picture:

In conclusion, the first thing bulls need to do is reclaim the broken black trend line (1st chart).  If they can do that, then they could put together a larger bounce, or at least a sideways time-burner.  If they can't, then a fifth wave extension stays on the table.  Overall, everything appears to continue to be on track for the read I've emphasized for the past couple weeks:  Namely, that bears have regained control.  Trade safe.

SPX Update: Confirmation

Back on August 19, I wrote:

[O]n 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.

In every subsequent update, I reiterated that I believed we were witnessing the start of a meaningful turn, though because it's hard to quantify the "it just feels right" instincts that come from 20+ years of tape reading, I also continued to caveat that we had no objective confirmation yet.  

Well, now we do.

On Friday, SPX finally added the structures needed to suggest a larger impulsive decline from this month's highs, and thus seems to have confirmed my read:

On the above chart, I noted that this is PRESUMED to be a fifth wave -- one of the tricky things during bear markets is that surprises come to the downside, and there is no law that says the current wave needs to complete in a "typical, usual, average" fashion.  If it were to behave in the "typical" way, the black trend line (+/- a little) on the chart below would represent a logical spot for wave 5 to end and thus to wrap up the larger wave 1 down, leading to a wave 2 bounce.  But I cannot stress enough that it does not "need" to do this, fifth waves can always extend, especially in bear markets -- so it's just something to be aware of.

Bigger picture, it increasingly looks like either ALL OF Blue 2 is complete, or ALL OF Wave A of Blue 2 is complete.  The latter option has some appeal, because it would allow Blue 2 to burn more time before the big third wave -- but again, bear markets, downside surprises, yada yada, everything I just said a paragraph ago.

In conclusion, SPX has now formed an apparent larger impulse down from this month's highs, suggesting that bulls will be taking the back seat for a while.  Trade safe.