SPX Update: Let's Take a Serious and Critical Look at the Bull Count

In all my years trading, I have never seen bears so demoralized and discouraged as they are right now.  NEVER.  As most experienced traders know, usually bulls are most demoralized near major bottoms, and bears are most demoralized near major tops.  In both cases, sometimes there's a final "washout" wave that crushes the last of the strong hands (bull or bear).  Make of that what you will.

Let's step back and take a serious look at the count bulls are banking on.  I mean, let's really try to envision this... and afterwards, we'll project what sort of things might need to happen at the fundamental level for this to work:

For the above count to work fundamentally, here are some things that probably need to happen:

1. Inflation needs to stop, obviously.
2. Rates need to come back down to somewhere near the lowest levels in history [which is where they were during the prior bull market], in order to again fuel some degree of debt expansion.
3. Commercial real estate needs to come back from the edge, and rates coming down would only be part of that equation:  People also need to return to working in an office and quit this remote stuff.  People also need to stop shopping online so that brick and mortal stores can make a significant comeback.
4. Treasury buyers must be found, in order to fund the rapidly-growing national debt and to help bring Treasury rates down, because it's hard to bring rates down when there are barely enough buyers to absorb supply.
5. China needs to find a way out of its pending demographic crisis, in order to keep buying Treasuries and in order to keep manufacturing cheap Widgets for us.  And also to prevent their highly speculative real estate market (which already features numerous literal "ghost cities") from melting down and causing any degree of global contagion.
6. American consumers need to get out of debt and start spending and taking on new debt again.  The problem with a lot of this stuff is "it only works once."  You can't max out your credit cards AGAIN until you pay them off.
7. GDP needs to increase substantially and in a real manner, since all recent "rises" in GDP have been fueled solely by the government borrowing and spending (see: Treasury oversupply, etc.).  Again, seems hard to do when everyone else is already tapped out, but no matter, it needs to happen to fuel that bull market.
8. Banks need to strengthen their balance sheets.  Of course, if commercial real estate recovers somehow and Treasuries come down substantially and mortgage rates come back down (so that banks aren't stuck holding all those 3% mortgages, which are a liability in the current environment), then banks will probably be just fine.  The problem is:  How do we get those other three things to happen?

This isn't even an exhaustive list of the fundamental challenges bulls are facing. 

So, for sake of argument, let's assume bulls can manage to make a new all-time high in SPX in the coming months (and that outcome is not a given -- in fact, it's not even a given that SPX will break the July highs).  But in that event, given what we know about the fundamental environment, this is what would look more reasonable to me:

In conclusion, is it possible I was "a wave early" in my long-term count?  Absolutely, it's an easy error to make and most of us do it at the micro level fairly regularly.  Is it likely I was WAY off and the black mega-bull count will show up?  You be the judge.  

Near-term, keep in mind that SPX is still sitting at/below resistance, via the July highs.  Trade safe.

SPX, NYA, OIL: The Grass is Always Greener -- When You Aren't Standing on It

Not a lot to add to the past several updates, but I have some interesting charts today nonetheless.  Let's start with INDU's very-long-term chart:

Next, a bit of a different perspective on SPX:

NYA highlights this even further:

Finally, oil has remained stalled at its inflection point for a few weeks now, and presents some interesting options from here:

Worth mentioning that we are closing in on the July high in SPX, and prior highs can sometimes offer resistance.  Btw, the "grass is always greener on the other side" because our very presence on the grass changes both its environment and ours, so unless we take proper care to nurture and sustain it, trapsing about casually ultimately kills it.  Not much else for now.  Trade safe.

SPX Update: It's All About Risk, Not Reward

So, briefly (because I want to get into this next part), SPX invalidated the micro impulse discussed in the last update.  This does not preclude a top (near-term or otherwise), it simply means that first apparent micro impulse was invalidated.  There's an option here for a return toward 4500-20, but it's mainly speculative at this point.

With that, let's get something out of the way:  I am not 100% accurate.  I am not 99% accurate, nor 95%, nor 90%.  If anyone is under the impression that I'm always going to be right, let me disabuse them of that notion right now.  This is not an exact science.  If one trades as if it is, or anything approaching one, then one will end up in trouble.

I've written before that my only goal is to be right more often than I'm wrong, and I do believe I've achieved that for many years running.  The thing is, even if I tend to be right with some degree of regularity, it's simply never going to be anything approaching 100% accuracy, so properly managing risk in your trades is always the most critical part of the equation.  

Let's unpack that a bit using an illustration:

Let's say you've developed a revolutionary new system that is right an astounding 90% of the time and you earn an amazing 100% return each time you're right.  Can't do much better than that, right?  The problem is, if you don't manage risk extremely well, you're going to go broke anyway, even with that miraculous prediction system.  Here's how:  On trade 1, you risk 100% of your account (because you don't manage risk well!) and you're right, so you've doubled your account.  On trade 2, same thing.  Trades 3, 4, 5, 6, 7, 8, and 9 -- same thing.  If you started with only $5K, you have now amassed an impressive $2.5 million.

But on trade 10, it all goes wrong, and you end up like this guy:

I've written many times that risk management is more important than any system that attempts to predict future market states, and that is why.  If your risk management is poor, then it only takes ONE SINGLE mistake, and your entire account can be flushed.  

If your risk management is just subpar, then it might take half a dozen or a dozen mistakes instead of just one -- but you're ultimately headed for the same place, just not as quickly.  The best "prediction" system in the world cannot compensate for all the losses that will invariably follow from poor risk management.

Part of risk management is knowing when not to act -- and then having the discipline to do nothing.

Part of it is understanding the nuances of the predictive system itself (one must understand these to understand the relative risk if one does decide to act).  

For example, at the October bottom, all my SPX charts were clearly labeled 3/C -- they were labeled that way before the bottom was even reached, when it was reached, and after it was reached.  Here's where the nuance comes in:  In EWT, the C-wave of a decline marks the very bottom of a correction, and the market rallies back up to new highs from there.  

That's a risk, and it's a risk that was clearly illustrated on the charts -- and if one knows the system, then one understands the C-label means there's a risk the market isn't going back down.  One understands that risk whether I talk about it repeatedly or not at all.  And one must then manage that risk accordingly.  Because, really, there's only so much I can do (we'll get to that in a second).  In the most recent example:  I not only accurately identified the existence of the risk in the first place, but I also accurately identified the exact price point at which that risk markedly increased.  

Most systems are hard-pressed to do that much -- much less any better than that.  If there's a system out there that does more than that, then I've never heard of it.  

The reality is, if you need me (or anyone else) to discuss every detail of managing risk/trading strategy/etc., then you probably shouldn't be trading at all yet.  Because I can't do it. Literally. To simply cover all the ins and outs of risk management alone in the depth required each time isn't practically possible. These are not detailed discussions of trading strategy or analysis of each and every risk management strategy and/or how they apply to your account, your finances, and your trading goals, they're just "here's where I think the market might possibly be headed." 

Anyway, referring back to the October low again:  Yes, I leaned toward the bears eventually "getting it done" in the end and maybe I was wrong about that (TBD), but:

1. On October 30, I laid out the options and listed the very first option as: "SPX has captured its Wave 5 target and does not need to go any lower. It could form a decent bounce from here (plus or minus a little). If one has been following these updates, then one already has hundreds of points of profit and may not feel the need to get overly greedy (not trading advice). Maybe it's that simple." 
2. At the same time, the charts implied that if 5 of 3/C had indeed completed, then we should be looking for a decent bounce (even the bear count suggested we'd probably get a fourth wave 100-point bounce).  Then when we captured that ~100 points, I adjusted everything and was still looking higher.
3. Around the time I adjusted everything higher, I clearly stated that my "not trading advice" for bears was to take NO ACTION until there was an impulse down.  See, to my thinking, bears should not have been heavily short by this point, having closed a bunch of profit on or around October 30, so that would allow them the option of non-action -- so I wrote that because I saw the risk of a meaningful C-wave bottom and was uncomfortable with it.  But that's just my approach, and my approach isn't always right.  If you took action anyway, then you did your own thing, despite my warnings.  Which you should always do, since nothing I write is trading advice, plus, as I said: My approach isn't always right.  It happened to be right in this case.

Could I have discussed that potential C-wave in more detail? Obviously -- anything can be discussed in more detail, which is part of the logistics problem I'm getting at here. Should I have? I dunno, but I do regret not discussing it more, because it seems that would have helped people. 

The bottom line is:  We're all pretty good at assessing potential rewards.  Maybe too good at it, since we can become blind to risk by the thought of rewards -- that's exactly the tendency that makes casinos such big business.  But one will go broke trying to trade the market without a realistic assessment of the risks and a good system to manage them.  

This is one of several reasons that NOTHING I WRITE IS TRADING ADVICE.  Because what I write can never and will never be enough information.  There are literal books-worth of information that lay the groundwork and serve as important context for even the simplest trade.  There's also a big difference between "what I may expect is reasonably likely to happen from an analytical standpoint" and when and how I might actually be willing to execute any trade at all based on that expectation.  The "expectation" isn't enough, nor is it the entire picture.

In the end, while Elliott Wave can seem like a crystal ball at times, it is not infallible nor an exact science.  Nor is any other form of market analysis or prediction.  Every system out there will go off the rails sometimes, and they'll do so with some degree of regularity.  Plan around that.  Because it's what you do at those times that will make or break your account in the long run.

*****

With that out of the way, let's take a look at three charts.  The first is a chart of COMPQ, which I published a couple weeks ago, illustrating what seems like the reasonable bull case.  Is it possible for it to be more bullish than this?  Obviously.  But for many fundamental reasons, some of which I've covered here recently, I presently have a hard time believing in those.  I'm not being "stubborn" with that belief; I'm just assessing the data as best I can.  (Further, the second chart will add another, more technical, reason.)

The next chart is SPX going back to the 1870s, and one of the reasons I have suspected we're either at or approaching a significant bear market.  Can that red (5) extend?  Sure, always possible.  Forget the emotion du jour triggered by the recent rally, and the recency bias that engenders, and think about what you know to be true fundamentally.  Then ask:  Does an extended fifth rally presently seem very likely to you?

Finally, the close up of the chart above, focusing on the move since the 2009 low:

The chart above implies that a "double retrace" back toward the 3300s is not an option that should be entirely dismissed.  In fact, double retraces retest the prior high (which we're getting into the ballpark of doing), THEN form their second legs down.  Can I guarantee that?  NO.  But it's certainly an option.

Anyway, I'm pretty drained now.  Trade safe.

SPX Update: The First Impulsive Decline in ~450 Points, Plus More Fundamental Reasons for Bulls (Not) to Be Thankful

 

"Now did you read the news today?

They say the danger's gone away.

But I can see the fires, still alight,

they're burning into the night."

-- Genesis, Land of Confusion

In several recent articles, I've discussed some fundamental reasons why a meaningful new bull market seems unlikely, but today, for a change, I'm going to look at this from a completely different perspective and instead present yet another reason why a meaningful new bull market still seems unlikely (ha).

The following comes from a brand-new piece by The Wall Street Journal (link is to MSN's reprint of the story, for those who don't want to mess with paywalls):

The office sector’s credit crunch is intensifying. By one measure, it’s now worse than during the 2008-09 global financial crisis. Only one out of every three securitized office mortgages that expired during the first nine months of 2023 was paid off by the end of September, according to Moody’s Analytics. 

That is the smallest share for the first nine months of any year since at least 2008 and well below the nadir reached in 2009, when 47% of these loans got paid off. That share is also well below the rate before the pandemic, when more than eight out of every 10 maturing securitized office mortgages were paid back in some years. 

While the numbers cover only office mortgages packaged into bonds—so-called commercial mortgage-backed securities—they reflect a broader freeze in the lending market for office buildings. 

Many office owners can’t pay back their old loans because they can’t get new mortgages. Remote work and rising vacancies have hit building profits, making it harder to pay interest. Higher interest rates have pushed debt costs up and building values down. That combination is fueling a rise in defaults. The share of office CMBS loans that are delinquent has tripled over the past year to 5.75%, according to Trepp... 

In the first nine months of 2019, for example, 88% of CMBS office loans were paid off when they matured, according to Moody’s Analytics. As interest rates and vacancies rose, that share dropped to 71% in the first nine months of 2022 and to just 31.2% this year. 

Okay, so what's the big deal?  Well...troubles in the commercial real estate (CRE) sector could potentially contribute to a larger banking crisis. Here’s how: 

1. Loan Defaults and Bank Losses: As CRE owners face difficulties in repaying loans due to lower rental income and higher vacancies, the risk of loan defaults increases. If defaults become widespread, banks could suffer significant losses, particularly those with substantial CRE loan portfolios. 

2. Asset Devaluation and Balance Sheet Impact: If CRE property values continue to fall, this will lead to a devaluation of assets held by banks. Since these properties often serve as collateral for loans, a drop in value can weaken banks' balance sheets and increase their risk of insolvency.

3. Refinancing Difficulties: Higher interest rates make it more difficult and costly for property owners to refinance existing debt. As loans mature and refinancing becomes harder, more property owners may default, increasing the pressure on banks that provided the original financing.

4. Banking Sector Exposure to CRE: Regional banks, which have a significant exposure to the CRE market, could be particularly vulnerable. If they start to incur losses, this could lead to a loss of confidence in these banks, potentially causing depositors to withdraw their funds and creating liquidity issues.

5. Contagion to the Broader Financial System: Losses in CRE could create a domino effect where concerns about one bank's stability spread to others. This contagion can be exacerbated if investors and depositors begin to question the health of other financial institutions, leading to a broader crisis of confidence and potential bank runs.

6. Regulatory Capital Ratios and Stress Tests: If banks begin to suffer losses on CRE loans, their capital ratios could fall below regulatory requirements. This could trigger intervention from regulators and possibly result in banks being forced to raise additional capital or reduce lending, further tightening credit conditions.

7. Impact on the Economy: As banks suffer losses and tighten lending standards, this can lead to a credit crunch, where businesses and consumers find it harder to get loans. A reduction in lending can slow down economic growth, potentially leading to a recession, which would further exacerbate the problems in the CRE sector and the banking industry at large. 

Therefore, while the CRE sector is just one part of the banking industry's portfolio, its troubles can have far-reaching implications, potentially triggering a larger banking crisis through a combination of loan defaults, asset devaluations, and a loss of confidence in the financial system. The interconnectedness of the banking sector means that issues in one area can quickly spread to others, leading to systemic risks.

But hey, maybe everything will work out just fine.

In Centralia, Pennsylvania, deep beneath the surface of the town, there's an old coal mine.  In 1962, that mine caught on fire.  At first, nothing much happened at the surface and many residents underestimated or ignored the developing danger.  Which worked fine for quite a while, actually.  It wasn't until the 1980s that people really began to understand the true scope of that heretofore unseen devastation -- after sink holes began opening up and swallowing sections of the town.  At which point it was discovered that the ground beneath the entire town was unstable.  The town was ultimately almost-completely abandoned.  (Incidentally, those fires are still burning, 61 years later!)  

Commercial Real Estate is one of several fires raging beneath the surface right now.  As is human nature, most people (either don't know about or) are ignoring CRE and will go right on ignoring it until a sinkhole opens up in their own backyard.  At which point they'll stampede for the exits.  The trouble is, once "everyone" knows something, it's often too late to act.  Just like the homes in Centralia, collapsing assets have little or no value once everyone has recognized the true risks.

Ironically enough, the mine fires in Centralia were initially sparked by a raging dumpster fire (essentially; it was a trash dump burn) right after a big celebration, so we can see this story has more than one parallel to today's market.

Anyway, like I said, maybe we can just ignore that and everything will be fine... or maybe the market will suddenly remember that the Fed standing still isn't going to fix this or fix bank balance sheets or fix Treasury oversupply (and so on), and that this rally is trying to launch itself from unstable ground.

If the market suddenly remembers that, the rally could end as quickly as it began.  But sometimes it takes a bit of time for the market to get up to speed -- if it didn't, then there wouldn't be a market, as everything would just zip instantly to the correct value, with no zig-zagging in-between.

The big news today, though, is that SPX seems to have formed the very first clean-high impulsive decline we've seen since its target capture back in October:

Concurrent with this, SPX has finally cracked its melt-up channel:

For people new to Elliott Wave, I do want to stress that this (on the chart above) is a micro impulse down, so it's entirely possible it only leads to a small c-wave down and then resumes moving higher. But I also want to take this opportunity to point out that simply following the two signals above would have saved bears a whole lot of pain.  

I want to take a moment to try to pass on a bit of edumacashun in Elliott Wave, as this is what I was attempting to outline on November 8, when I wrote:

In conclusion, there's no quick and easy roadmap in the current position, so we'll just have to watch for potential impulsive declines in real-time and take it from there. Waiting for impulsive turns can sometimes help bears stay out of trouble in the event the "straightfoward bull count" shows up, since that approach prevents one from shorting the entire ride up to new highs. It also gives one a clear stop (against the high where the (pending) first impulse down began), as opposed to the current situation, where the only crystal-clear level is way up at 4607. None of that is trading advice.

So now we have a clear stop -- i.e.- "the high where the [no longer pending, but finally actual] first impulse down began"; in this case, that's 4557.05.  This is one of the ways I utilize Elliott Wave in trading (as always, absolutely nothing I write is trading advice, consult with your broker, etc.).  

But as a hypothetical:  For example, now we have our first impulse down, so if I shorted (for sake of illustration) 4540 with a stop at 4557.05 then (presuming I'm playing ES (e-mini SPX futures) and excepting overnight gaps) my presumed risk would be ~18 points, which is a fair bit better than losing ~450 points.  It's not foolproof, and sometimes the apparent impulse is not an impulse -- but the start of the first impulse down gives one a level to act AGAINST, which serves to define one's risk more clearly and may keep one from "holding and hoping" their way into bigger losses.

I've been doing this for a long time, and when I write "there's no quick and easy roadmap in the current position," I'm giving my best read of the market -- and "I have no good read" is, for me, anyway, a signal to step back and be patient.  Which is why I tried to convey that it was a good time for "waiting for impulsive turns" in order for bears to "stay out of trouble."  

Anyway, this rally has been a solid illustration of why I've developed the rule of waiting for an impulsive decline (or rally, sometimes) when the market turns ambiguous.

Of note, NYA and COMPQ are both in the general ballpark (plus or minus a bit here) of resistance zones:

COMPQ:

In conclusion, we'll see if this apparent impulse goes anywhere, or if it turns out to be just a speedbump.

As is tradition, I'll be taking Black Friday off, since it's a half-session anyway and I don't get paid enough to work on holidays.  Happy Thanksgiving to everyone!  Trade safe.

SPX, COMPQ: Market Cap to GDP

Not a lot to add to recent updates, so I'll add an interesting chart today:

The chart above is yet another argument against any kind of meaningful bull market developing against the backdrop of current valuations.  The last time market cap to GDP was this high, the market was boosted by rampant QE and government stimulus, which I believe most people agree (even bulls) fostered a bubble in equities.  Is the prevailing belief really that we're headed for another such bubble?  What evidence is there that the Fed intends to foster the environment necessary for such a bubble?  None that I can currently see. 

Chart-wise, no real change from recent updates, though I do want to stress that last update, I wasn't saying we were "for sure" in a c-wave rally, in fact I went out of my way to stress that we could very well not be.  I was simply pointing out that it was the best fit for the pattern at the micro level.  An interesting twist on that theme might be a WXY, wherein -- IF we are in a C-wave rally -- the next decline is the X wave, then we go on to form another ABC higher.

Anyway, it's too early to worry about that option, and I stand by my "not trading advice" from November 8, where I suggested bears might want to await an impulsive decline before getting involved with this market again.  As of right now, SPX is still in the melt-up channel:

As a reminder, the reasonable bull count (given that we know fundamentals probably don't support a major bull market) still looks something like this:

And as another reminder, the "bullish for a little while but ultimately bearish" count would still be represented by the black "or (2)" above, and the red trend line below:

So, as I said out the outset, not much to add.  Trade safe.

NYA Update: (Don't) Trade What You See...?

SPX traded sideways since last update, so there's nothing to add on that front, but I do want to share with readers the reason I didn't immediately jump ship on the bear count.

Maybe the pattern below is NOT what it fully appears to be -- if it's not what it looks like, then bulls are in the clear.  But take a gander and see if you agree that the highlighted portion of the move (in red) appears to be three waves.

The little red abc sure looks like a classic B-wave high -- tell me if you think I'm nuts for seeing that or if you see the same thing? -- which would in turn imply the low was wave C of B, and further imply the current rally is the C-wave of an expanded flat.  So that kept me from assuming the best for bulls, and still gives me pause (or "gives me paws"?) -- but maybe that's just not what it is.  In any case, readers with a working knowledge of Elliott Wave know that B-wave highs and lows are "false" bottoms or tops and destined to be revisited.  We'll find out soon enough if that's the case here or not.  

Maybe -- and I can't stress this enough -- maybe it's just not.  But I've never been able to ignore what I see, for better or for worse.  In this case, the high-precision, low-tolerance nature of this count is one of the reasons why I advised awaiting an impulsive decline before getting too active with it.  The bull count is not shown on this chart, but remains as previously stated.  Trade safe.

SPX, COMPQ, OIL: Bull and Bear Arguments

Last update, I wrote about how there had been no "big surprises" from the market in a while, but I'll readily admit that yesterday's move surprised me.  I thought that, even if the rally were ultimately destined to head higher, SPX would at least pause near the 4430-55 zone.  Instead, it gapped over it (which is one way that the market sometimes conveniently avoids addressing a resistance zone -- due to leverage, it's much easier to drive a rally in futures than it is to drive one in the cash market).

So, it seems I was indeed "due" for a screw up, and I got that one wrong.  

That said, I do want to note that I never backtracked from my piece on November 8, when I wrote:

In conclusion, there's no quick and easy roadmap in the current position, so we'll just have to watch for potential impulsive declines in real-time and take it from there. Waiting for impulsive turns can sometimes help bears stay out of trouble in the event the "straightforward bull count" shows up, since that approach prevents one from shorting the entire ride up to new highs. It also gives one a clear stop (against the high where the (pending) first impulse down began), as opposed to the current situation, where the only crystal-clear level is way up at 4607.

Any bears who followed that "not trading advice" haven't lost a dime on this rally yet, so I hope it helped someone.  I'm at least glad I published that when I did -- and even last update concluded by reminding bears that while I was leaning their way from an analytical standpoint, I wouldn't bet the farm on that, because, quote: "we don't even have an impulse down yet!"

Anyway, now we get to try to figure out what the market is actually trying to do here.

The simple answer, if you're a bull, is "run to the moon."  If you're a bear, then it's the opposite.  And while either of those stances is easy to say for the "perma" crowd, supporting them is the rub.  

Let's start with the bull argument, which is tied to the news that became the excuse for the rally:  The CPI report was released yesterday, and core inflation rose a bit less than analysts expected (they expected .3% over September, but it rose .2% instead).  This, in turn, leads to the hope that inflation will continue moderating (it's a bit confusing/misleading when analysts say inflation is "falling" -- inflation is still increasing month-over-month, just not as quickly as it was before), which in turn leads to the hope that the Fed will stop raising rates, which in turn would take some pressure off the market and the economy, and maybe forestall a recession.

Core Inflation came in at 4% (in September, it was 4.1%); the Fed's target for Core Inflation is 2%.  Thus, the bull argument is partially predicated on the belief that Core Inflation will continue moderating until it reaches the Fed target of 2%, prompting the Fed to declare victory and go home.

Overall inflation, which is the rate at which your overalls expand during the holidays, was 3.7% in September, but came in at 3.2% for October, largely because people ate less due to an increase in the price of food, thanks to inflation.  Wait.   [consults notes...] That's only partially correct (I trust my readers are smart enough to figure out which part!).

Now, the hope for bulls here is that the Fed will see all this and decide that all the numbers are headed in the right direction and thus that they no longer need to raise rates.  

But here's the thing:  Given the speed of this rally, bulls also seem to be hoping that the Fed will then relaunch QE while consumer debt simultaneously vanishes overnight (thus giving people a whole new clean slate of spending power) and the market will head right back into a significant bubble.  Because... 

(and this leads us into the bear argument)

...as we've discussed here previously, P/E ratios are not "low" by any means.  To the contrary, the current P/E of SPX is now hovering near 25, which is already into "overvalued" territory.  

For comparison, in October, 2007, at the peak just before the biggest bear market in recent history, the P/E ratio was 23.41.

Can an overvalued market get even more overvalued?  Absolutely.  We've seen it happen many, many times in the modern era of centrally-managed currency and interest rates.  But that doesn't change the fact that the current market is not exactly a fundamentally good value.  

No one is buying here because prices are low.  Prices aren't low, so they're not scooping up great values in solid, beaten-down stocks.  

They're buying because they're afraid that other people are going to buy before they do.  

And, whether they know it consciously or not, one could argue that buyers are not only banking on the Fed ceasing their campaign of raising rates, but on the Fed cutting rates fairly quickly and probably stimulating the market again.  Because P/Es rarely get much above current levels without either a bubble or a crash (in the case of trailing P/Es, where prices drop rapidly to make past earnings seem massive by comparison).

And hey, maybe that bubble will happen.  Wouldn't be the first time.  But that's at least part of the bear argument.

Let's take a look at oil.  So far, oil is bouncing off its downside inflection zone (usually my identified inflection zones work, unlike SPX yesterday!).  Equities bulls probably need to also be oil bears (since bullish oil drives inflation higher), and oil bears probably need to see a sustained breakdown at the rising blue line, for starters -- though I haven't updated the annotation since the prior warning, since I literally can't fit anything else on this chart without deleting something, and that seems unnecessary right now.

Next, let's look at COMPQ, which outlines the most obvious bull option.  The most obvious bull option is a simple straightforward fifth wave to new highs currently underway.  This would jive (for a reasonable bull case, that is) with what we're seeing from a fundamental standpoint, suggesting that even if COMPQ makes a new all-time high, it's not the start of a big new bull market, it's the end of one.  Of course, that's the most bearish interpretation of the bull count, but also the one that requires the least speculation.

COMPQ seems to be heading toward the "or (2)," which I placed on the chart on October 26, but now regret not discussing in more detail at the time.  While I make every effort to remain as objective as possible, I'm human too and am not magically immune from getting swept in by the prevailing sentiment, though I suppose I should see if it even reaches that before browbeating myself too much.

For SPX, we're just going to look at a simple chart for now.  For the past week-plus, I felt confident enough that the market was headed higher to publish the chart with blue ii/4 overhead (above then-current prices), but now that we've passed that zone, we're into a sort of no-man's land as far as I'm concerned.  So I'm not going to publish a chart that suggests we're headed to X zone next, because I just don't have that read to offer right now.

In conclusion, there are still bear options here, but obviously, bears will need to show they have even a little firepower to stop this thing for more than 10 minutes, and thus bears should still continue to await an impulsive decline before stepping in front of this steam train (not trading advice).  On the bull side, nothing has changed from November 8, when I wrote that their count was straightforward, that is: "ALL OF C completed at 4103 SPX and it's on to new highs (north of 4607)."

Trade safe.