SPX, COMPQ: Putting Out the Fire with Gasoline

I normally don't comment on the machinations of politicians, but this is relevant to the market, particularly as it relates to the Fed and to inflation.  

In his State of the Onion (a million years ago, when my little sister was just learning to read, we were in the car one day and she was trying to read every business sign we drove past.  We passed "Union Bank" and she dutifully recited, in her monotone, "Onion Bank" -- and my parents and I laughed.  But, unbeknownst to me at the time, my sister had unwittingly doomed me to constantly call union "onion" for the next 40 years and counting.) Address (yes, we're still in the same sentence here!), Biden proposed that "instead of waiting for inflation to come down," he wants to give away a bunch of money to homeowners and wannabe homeowners (i.e.- presumably to everyone) immediately.  

Most of us who didn't flunk Econ understand that flooding the money supply with more dollars is the exact thing that causes inflation in the first place (see: Covid stimulus, Fed printing, etc.).  Printing more money without a corresponding increase in production doesn't create wealth for the same reason that printing more first edition Superman comics would drive the value of each comic down:  The more abundant a resource is -- be it comics, gemstones, or cash dollars -- the less each unit of that resource is worth.  For this reason, printing money only makes existing dollars worth less (new money, without production, has no choice but to steal a portion of the value from existing money, which is the one and only reason newly-printed money is assigned any value at all).  We experience this at the ground level as goods and services costing more -- aka: inflation.  But really, goods and services haven't gone up, the value of our cash (and our savings, and our wages) has instead gone down, so it takes more dollars to buy everything.

Anyway, this proposal, were it to pass, is a sure-fire way to create more inflation.  And probably to drive the cost of housing up even further in the process, to boot.  Hence today's title.  To frame "more free money" as some sort of solution to inflation is akin to suggesting that more water is a solution to drowning.  So, it may be relevant to keep an eye on whether this proposal gains steam or not, because if it does, it will likely force the Fed to keep rates higher for longer.

Market-wise, we had a down day on Friday, coincident with COMPQ hitting next resistance -- but bears still have work to do to make it more than that:

COMPQ first:

SPX, which discusses what bears would need to do next:

And, just because it's out there, a little discussion on some bigger-picture bull and bear options:

That's it for today.  Now, using politician logic, I'm going to go conduct an experiment to find out if pouring more water in a clogged sink will finally stop it from overflowing.  Trade safe.

SPX Update: The Trend is Your...

On February 26, I wrote: 

[T]o my way of thinking -- at least for the time being -- it's just a matter of following the trend until we get another impulsive decline to signal a possible short-term (or longer term, if it's a larger impulse) trend change.

And there's been no change to my stance.  So there really hasn't been a whole lot to say (since I don't like to repeat myself too often) in the weeks since.

Last update noted that SPX had finally formed an impulsive decline, but also that there were reasonable odds it was just the C-wave of an expanded flat, and hence the end of a correction and not the start of one.  The indicator that bears would have needed (in order to tilt the field their way) was a break below Tuesday's low, but that never came:

Beyond that, not much more to add, still... for now.  Trending markets can be a bit boring.  As the old saying goes, "We contend:  The trend that's your friend may extend and append, so don't condescend lest your bowels distend."  Or something like that.  Trade safe.

SPX, COMPQ, INDU, and The Big Lebowski

(Warning!) Random thought/rant:  Yesterday I was watching a show and heard the expression "your truth" -- and it occurred to me that this expression is essentially an oxymoron.  "Your" implies subjective possession, but "truth" transcends subjectivity and exists independent of you and me.  Thus, the truth cannot be predicated with "your."  Either something is true or it isn't, regardless of whether we believe it or not -- we don't own the truth even if we manage to align our personal beliefs with it.  And it continues to exist for anyone to discover, even after we're 6 feet under.  Thus, there simply is no such thing as "your" truth or "my" truth.  

Instead of "your truth," we used to say "your opinion," which is the proper way to express the underlying reality.  This may seem nitpicky, but clear language allows us to think (both individually and as a group) with accuracy.  Further, two incorrect beliefs are smuggled into the conversation, and into our thoughts, with the expression "your truth":

1. Whatever I believe is elevated to being reality, regardless of whether it aligns with reality or not.
2. Objective truth doesn't exist (the word "truth" is being quietly redefined to mean "opinion," which means (if we accept that, tacitly or otherwise) all truth is just, like, your opinion, man.).  

Anyway, I'm against destroying the language, because it destroys our ability to communicate, which in turn destroys our ability to think and act collectively.  Which can only lead to society moving backwards.  

Rant over.

Yesterday, the market dropped for a minute or two, but it's unclear if that means anything, even for the near term:

Bigger picture, INDU continues to suggest that bulls will maintain control at the larger time scales for the time being:

COMPQ is near a zone that could act as resistance for a time:

That's about it for today.  Trade safe.

SPX Update: ______ ___ _______ __ __________!

Last update gave a nod to the old adage: "never short a dull market," and that proved to be valid wisdom for Friday.  Today could see the market correct some of those gains, but again, there's just not much more to be drawn from the near-term at the moment.  I'd rather let the market lead than try to force my own biases onto the charts and "see what I want to see," so I'm continuing to take it as it comes until a pattern reveals itself in a more concretized fashion.

As I've covered all the bases and hit all the beats at various time frames over the past week or two, there's not much to add beyond that, for now.  Trade safe.

SPX Update: A Dull Market

There's really nothing to add to the past few updates:

We can see on the chart above that SPX is in the zone of retesting the all-time high, so while there's nothing in the pattern to indicate much one way or the other, classic technical analysis says that prior highs have the potential to act as resistance, so if bears are going to do anything, then now's the time.  I don't have much of a lean one way or the other at the moment for the near-term.  Intermediate term, I've already discussed the hurdles bears face, so nothing new on that front.  Trade safe.

SPX Update: But the Levee Was Dry

 

Now, the halftime air was sweet perfume 

While sergeants played a marching tune 

We all got up to dance 

Oh, but we never got the chance 

'Cause the players tried to take the field 

The marching band refused to yield 

Do you recall what was revealed 

The day the music died

-- American Pie, Don McLean

For anyone who's unaware:  The "sergeants/marching band" represent the military industrial complex.  The players are us.  And, as we all know, once they had it, the "marching band refused to yield" control back to the people.  That portion of the song is about the loss of the American republic to the interests that still control it.  For some reason, it felt apropos to mention today.  Make of that what you will.

Looking at SPX intermediate term, we can see the zone bears will need to claim to put the bigger brakes on things.  If bears cannot claim and hold that zone, then we could be a ways away from any meaningful tops.

Near-term, further correction from here is possible, but not guaranteed.

If we put those two charts together, then we see that bears would need to create a larger correction here that then whipsaws the breakout on the first chart -- if they want to get something going for more than the short-term, that is.  If it does continue lower directly, then a gap fill down toward 4980-90 would not be out of the question.  If that happens, then we'll take it from there.  Given the significant number of x-factors in the overall picture, I'm content to let the market lead for now.  Trade safe.

INDU Update: Two Charts = the Market a Nutshell

Let's just look at two charts today, because these two charts sum up the overall situation.

First is a chart we've looked at recently:

On the chart above, INDU could run higher and still be in the diagonal -- the rule in an ending diagonal is that the length of wave (iii) cannot exceed the length of wave (i), and INDU is nowhere near violating that rule yet.  You'll notice I did not specify "contracting" ending diagonal -- I did this because after ~25 years of charting with Elliott Wave, I'm still not convinced that "expanding" diagonals actually exist.  I think one can usually find another explanation when one is tempted to employ an expanding diagonal.  

So, much as I do not recognize Disney's abomination of a trilogy as actual "Star Wars," I do not recognize "expanding diagonals" as legitimate patterns.

Next up is a closer view of INDU, which I began calling attention to in early January, as this chart summarizes the issue:

In conclusion, this market long ago detached from fundamental reality, so to my way of thinking -- at least for the time being -- it's just a matter of following the trend until we get another impulsive decline to signal a possible short-term (or longer term, if it's a larger impulse) trend change.  If one looks back to last update, one can see it is possible that SPX is getting close to wrapping up a smaller fifth wave, so a correction this week is not out of the question -- just not willing to front run it from an analytical perspective, since it's an ambiguous pattern.  Trade safe.