SPX, INDU, COMPQ and You

So, they've elected to make things interesting.  Last update, I speculated that perhaps bears would get a little respite... which they sort of did, but not as much as I'd projected.  Perhaps counterintuitively, this makes things more complicated, not less.  Let's get right into it, starting with SPX and a bear case:

Here's the forum post referenced above, along with the SPX 24-hour chart, as of ~30 minutes before market open:

So, that's at least interesting.  We'll see if SPX elects to break that near-term low, or if it instead wants to "catch up" to futures and run up to that level, too.  And if it then feels it's done making lows entirely and feels that little new low it made was enough to satisfy my prior instinct (on Monday) that another near-term low was still out there.

Also of interest, INDU shows that in the event things did go bearishly for SPX, then there could be some room to run.

Finally, let's talk about the bull case.  COMPQ reached my unofficial target zone (my "unofficial" targets are those I often scribble on the charts based on experience and instinct, but don't call out beyond that, because I have no concrete math to back them up.).  I added the lower "IV?" to this chart as of today:

So we can see on COMPQ that the decline reached an inflection zone and bounced, so that does give bulls the option to take over.

In conclusion, futures behaved as I suspected they would, but the fact that cash hasn't (yet?) pushes everything into an area that's much less comfortable, analytically, because the number of near-term options has increased significantly.  I tend to want to continue to lean very, very slightly toward the bears over the coming sessions, but we'll take it as it comes.  Trade safe.

SPX, INDU, Wilshire 5000: "Refer" Madness

On Friday, the market went to breakfast and never returned, leaving both bulls and bears to wonder if maybe they'd chosen the wrong profession.  Accordingly, I have no real choice but to repeat Friday's closing paragraph, with one change (noted below):

In conclusion, because we are into "never bank on fifth waves" territory, there's always the possibility that the rally is done, but right now it probably looks slightly more likely that there's still another 4/5 unwind out there lurking. Do be aware though, that even if the current drop is "only a fourth wave," because the prior fifth wave extended, it does at least have the potential to retrace much deeper than shown (it could retrace most of the post-Fed rally if it wanted without creating any technical problems). In any case, not a lot to go off of beyond that, so we'll see how things look on Monday Wednesday.

Here's an updated chart:

Sorry!  I didn't have my reading glasses on, I don't usually publish that Wilshire 5000 chart!  Lemme put those on real quick... okay, here's INDU:

And here's SPX, only exploring the bear case, because we all know what the bull case is, and because INDU rallied in three waves after an impulse down, so unless INDU can break higher, we might be looking at the near-term bear options:

In conclusion, we're still in very speculative territory here, so keep that in mind as a caveat and just because I only published bear charts doesn't mean those are hard and fast predictions, just speculations -- the market could easily go the other way (refer back to first paragraph for context).  Trade safe.

COMPQ Update

Readers got a free "bonus update" on Wednesday because nobody reminded me that it was Juneteenth, which is an important holiday commemorating the fact that months can also be numbers.  There have been years I've forgotten my own birthday (not kidding) until someone (usually my wife or one of the kids) said, "Happy Birthday," so I can hardly be expected to remember every holiday on the calendar, especially those that have only become official recently.

Anyway, it turns out I should have taken that day off and now the market owes me one.  Also, there's not a lot to add to that update, so I took the time to label the COMPQ chart.  I've discussed this in prior updates, but sometimes it helps to have a visual, so here it is:

In conclusion, because we are into "never bank on fifth waves" territory, there's always the possibility that the rally is done, but right now it probably looks slightly more likely that there's still another 4/5 unwind out there lurking.  Do be aware though, that even if the current drop is "only a fourth wave," because the prior fifth wave extended, it does at least have the potential to retrace much deeper than shown (it could retrace most of the post-Fed rally if it wanted without creating any technical problems).  In any case, not a lot to go off of beyond that, so we'll see how things look on Monday.  Trade safe.

SPX Update

Last update noted that there was a reasonable possibility that the few days prior had merely been a micro 4th wave correction, and SPX proceeded to launch a pretty blistering rally from there.  I continue to encourage bears to await an impulsive decline before getting too committed, especially since a continued 5th wave extension is not outside the realm of the possible.

In conclusion, the last few updates have (in my opinion) clearly outlined where I stand on this wave.  Essentially, while it's very possible that we're closing in on the end of this rally, and several other indices are behaving much more weakly than SPX and COMPQ, the trend in SPX remains up until there's an impulsive turn lower.  Trade safe.

SPX and BKX: SPX vs. The World

While I have my eye on many charts right now -- for example, NYA and INDU have both languished below recent highs despite the relative strength in SPX -- one chart I'm watching carefully is BKX.  BXK has been in a downtrend for a month now:

As noted, BKX is only three waves down so far, but we should keep an eye on this one to see if that decline becomes an impulse.  If it does, it should portend at least an intermediate correction (were it to form an ABC down), if not much more -- the most bearish case being the red 2/B on the chart, with Red 3/C being the start of a major bear wave.

SPX may have simply completed a complex ("simply... complex"?) 4th wave at micro degree, but I can't rule out the bear option yet.

In conclusion, SPX still has not formed an impulsive decline at any wave degree, so there's nothing for bears to write home about yet in that index.  I'm keeping a close eye on BKX (and NYA and INDU) though, because if those markets go on to form impulsive declines at larger degree, then that may be the canary in the coal mine.  Trade safe.

SPX, COMPQ, INDU, and The Miracle of AI

On Wednesday, Fed Chair Jerome Powell gave his scheduled speech, but no one knows what he said, because I'm too lazy to look it up.  Given the market didn't bother to react, I assume it was his usual canned talk about "tools" and "keeping careful watch" and such.

(Above:  Chair Powell speaks; original image made with AI.)

The above image of Chair Powell was made possible by The Miracle of AI and was generated merely by using an increasingly-frustrated series of prompts.  Even with all the frustration and missteps, it "only" took 15 minutes to get something vaguely resembling what I was asking for -- whereas, before AI, I never would have even bothered, because "Chair Powell" just isn't a good enough pun to waste hours on in Photoshop. 

While I never got the image I quite had in mind, that may be my fault for not having Enough Commitment to the Project.  Here's the final image AI generated from my prompt, and precisely where I gave up:

Anyway, the point is, NONE of that frustration would have been possible without The Miracle of Eh Aye.  The future is bright indeed!

Chart-wise, we're now getting into the zone where I think it's reasonable to start placing the 5 label with a "?".  Assuming no fifth wave extension, we could be close to completing the current fifth, though the prior caveat about it being unclear if there is one more 4/5 unwind still needed persists, for now.

Interestingly, INDU has not exceeded its prior high.  On June 5, I offered this speculation:

INDU is interesting, and there are multiple possibilities in its pattern -- including the possibility that a larger correction in INDU has already begun. In that option, INDU could bounce in wave 2/B while SPX rallies to a modest new high in Wave 5, before they both decline again together.

 

And COMPQ is likewise in its inflection zone:

In conclusion, multiple markets have reached inflection zones, but please continue to keep in mind that we do NOT yet have anything resembling an impulsive turn lower, and these are zones, not hard levels, so we'll just have to see how the market reacts from here.  Trade safe.

SPX and COMPQ Updates

There's not a lot to add since last update, but I think last update's conclusion bears repeating:

[W]e're probably getting close (days to weeks) to a significant correction, and potentially even to the start of a new bear market. That said, fifth waves are intentionally tricky to nail down, so they always leave themselves the option for things like fifth wave extensions, just to severely punish bears one last time... so my policy is generally to await an impulsive decline before deciding to buck the trend with any conviction. Even after that first impulse down, MOST OF THE TIME (not always, of course), there's a big bounce that comes reasonably close to the prior high, and that's usually a reasonable time for bears to get serious.

COMPQ is unchanged, but I do want to expand a bit on the annotation here.  I noted that COMPQ might need one more 4-5 unwind requiring "days to weeks" -- in case readers don't entirely know what's meant there, it would mean COMPQ is still in a lower degree 5th, which, when it completes, would correct in a 4th wave, and THEN go on to the final fifth wave rally to new highs.

 SPX is in a similar boat, in the event that blue 3 and 4 are actually the lower degree iii and iv:

It is for those reasons, along with the ever-present threat of a fifth-wave extension (in fact, we seem to be witnessing a micro fifth wave extension in ES as I type), that I continue to advocate awaiting an impulsive decline before getting too committed to the bear side of things.  We'll see what the Fed meeting brings today.  Trade safe.