Friday, January 17, 2020

SPX and INDU: Market Attempting Key Long-Term Breakouts

Last update provided a timely invocation of "Never short a dull market," and the market has rallied nonstop since.  Today, we're going to take a look at a couple of potentially important long-term breakouts.  First, SPX:

We can see SPX is attempting a breakout over its long-term channel, which goes all the way back to the beginning of last decade.  The channel isn't perfectly defined, though, so there's a little wiggle-room there -- but going back to 2011, the only other time SPX got above the black line was at the end of 2017, during the prior minor extended fifth -- so this breakout will be significant if it sticks, and would indicate that the bull market is entering an acceleration phase (as crazy as that may sound to bears).

"If it sticks" is the operable phrase, though, and the market has not yet tested the breakout, which it would normally be expected to do at some point.  In the event that test were to fail significantly, then we could see a redux of the beginning of 2018.  Presently, I do not expect that to occur.  Back at the beginning of 2018, long-time readers will recall that I actually predicted 2018 would "rhyme with 1987" -- that we would have a mini-crash in the context of an ongoing bull market.  That prediction proved uncannily prescient, as we had both a deep and scary mini-crash, and now a resumption of the "ongoing bull market."

Point I'm getting at is that the waves appear to be in a much different position than they were in 2018, and SPX appears to need multiple fourth and fifth waves at higher degree before it can have a longer-term correction again.  Though, to be entirely fair, it does have about 300 points of downside that it could play with if it wants, so I suppose there's some room for a scary intermediate correction -- but we'll worry about that if and when the breakout whipsaws, because we could just as easily see a repeat of 2017's extended fifth, where RSI just keeps getting more extended.

In other words, as the advice so often has been for bears over the past 10 years:  Await an impulsive decline before getting too excited.  If an extended micro fifth materializes here, then we could run another 200-300 points without any significant corrections.

So we'll have to live in the moment.  ;)

INDU is likewise attempting to breakout over a long-term trend line -- in this case, represented by the blue line:

In conclusion, SPX and INDU are both staging breakouts over long-term trend lines, which could put them into acceleration phases (as crazy as that may sound at this stage).  We will continue to track the short-term and stay alert to any potential impulsive declines, because the next impulsive decline could signal at least a larger, potentially-tradeable fourth wave.  Trade safe.

Wednesday, January 15, 2020

SPX Update

We've looked at the intermediate and long term ad nauseum of late, so today we're just going to focus on the near term.

The first near-term chart shows the zone bears need to claim to start getting a correction going:

The second chart zooms out a bit and shows the larger uptrend channels (i.e.- the amount of wiggle room bulls have before they need to actually consider becoming too concerned about any near-term declines):

In conclusion, this is the nature of bull market uptrends -- they're kind of boring to talk about (I suppose that's one interpretation of the old expression that says: "Never short a dull market.").  Perhaps bears will get at least some near-term excitement soon, depending on how the market reacts to the first noted trend line (if it even reaches it).  Trade safe.

Monday, January 13, 2020

SPX and INDU Updates

Not much to add.  Near-term, the market established a small downtrend on Friday, so bulls will need to sustain a breakout over 3275-78 to help break that down trend.  Long-term, the market has plenty of wiggle room:

INDU shows the relevance of Friday's low:

In conclusion, the market established a near-term downtrend on Friday, so bulls will need to muster a bit more upside to break out of that.  Intermediate and long term, the uptrend remains intact.  Trade safe.

Friday, January 10, 2020

SPX Update

Last update, I thought we might see a short-lived correction, but that failed to materialize.  It's rare that I completely whiff a near-term call like that, but it does happen, and I whiffed that one.  Apparently, the market felt that the work done in the futures was enough.  Longer-term, we were still expecting higher prices, so no change to the big picture:

Near-term, the blue channel is now the first zone to watch:

In conclusion (as I've written in the past) during bull waves, surprises tend to be to the upside -- and that's what happened on Wednesday.  Long-term, there's no change, and the bull market likely still needs at least one (if not two or more) more large fourth wave correction(s) and larger fifth wave(s) higher before we can give much thought to anything but the larger uptrend continuing.  Near-term, we can't yet rule out an expanded flat, so a near-term correction could still materialize after all.  Trade safe.

Wednesday, January 8, 2020

SPX and INDU: Room to Correct

Last update noted that we were at an inflection point and that we should at least be alert to the option of a larger correction.  Let's get right to the charts to examine that option.

First up, as noted last update, INDU did capture its October target:

Second, we can see SPX could test a similar line:

Finally, on a weekly time frame, SPX has plenty of wiggle room to correct here and still remain within both its long-term and intermediate-term uptrend channels:

In conclusion, as long as the all time high holds, I suspect we see at least a modest correction here, but will have to see if a potential ABC develops into an impulse to determine if that will turn into anything more than a near-term stall.  Trade safe.

Monday, January 6, 2020

SPX and INDU: October Targets Captured

Last update, we talked about a potential bottom right at Friday's open, and the market bounced from the open through the rest of the session.  Today it looks primed to open lower, but it's worth noting that futures are still above Thursday/Friday's low (for the moment), which crosses near 3206 cash equivalent.

That said, INDU did capture its intermediate target from October.

In SPX, as I mentioned back on 12/23, some whipsawing in this zone wouldn't be unusual.

In conclusion, this is the inflection zone we began looking at a few weeks back, and the market has captured its upside targets -- so it's not impossible for a larger correction to develop here.  We'll have to see how the market reacts over the next few sessions.  Trade safe.

Friday, January 3, 2020

Brief, Unscheduled Stop

First off, I hope everyone brought in the New Year safely!  I hadn't planned on doing an update today (was planning to return Monday), but I decided I do want to publish a quick chart.  This is the combined SPX (cash) and ES (futures) "24 Hour" SPX chart:

There's a chance that the most recent high is a b-wave.  This makes the blue horizontal line pretty critical for the near-term.  If the high is a b-wave, then the blue horizontal likely marks the bottom of wave-c down from that high, and thus the completion of an expanded flat.

In other words, we could bottom right at the open (give or take a little; the blue line is below the probable opening price).

Conversely, if the wave down from the all time high is instead wave A or wave 1 down, then we would expect another wave down of roughly equal length (~57 points +/-), with the potential for an extension (~92 points +/-) -- thus the blue line is rather important, at least from a near-term perspective, and this gives readers some levels to watch if it's broken (simply use the above numbers subtracted from the prevailing high) in a sustained manner.

To be fair, we probably need to see a more substantial bounce to have more faith in those targets (in the event of a sustained break) -- a decent bounce would help add confidence to the idea that a new low is a new WAVE (meaning wave C or 3 down), as opposed to simply being the final subwave to wrap up the aforementioned expanded flat.

That's about all I have to add at the moment -- I'll return Monday with a more complete update.

That said, I would like to take this rare occasion (the turn of a decade) to wish all my readers and their loved ones a healthy and prosperous New Year; and also to thank everyone who has shown support during this past decade or so -- your kindness is truly appreciated.

Trade safe, and see you Monday.  :)