Monday, October 15, 2018

SPX and INDU Updates: Inflection Point

While studying charts this weekend, I discovered a very interesting support confluence, which INDU tagged perfectly on last week's decline.  Coupled with the price action on Friday, this tells us that bears probably want to be cautious here -- because all that means this is an inflection point where the market could reverse higher.

Long-term, this is something of a no-man's land... if the larger wave c of B ended, then we'd ultimately expect the 2018 lows broken -- but that doesn't mean the market can't bounce around for several weeks first.  Especially if last week's decline had an extended fifth wave (which I believe it did) and extended fifths are notorious for being followed by complex corrections.

Near-term, if this is part of a larger expanded flat C wave down, then wave (1) of C may have completed last week.  I've also added a bull count that we can't rule out (an ending diagonal for c of the larger B):

In conclusion, unless and until INDU/SPX can sustain breakdowns of their noted support zones, I think bears want to tread carefully.  If wave (1) down has completed, then a vicious 2nd wave bounce may be forthcoming.  Of course, if SPX instead sustains a breakdown, we'd have to presume the current wave is still unfolding.  Fortunately, we do seem to have a relatively clear dividing line to work with.  Trade safe.

Friday, October 12, 2018

SPX, INDU, BKX: Finally

I started warning on October 5 that the trend might be changing, and noted that

...yesterday's low appears to be critical for bulls, as it's the dividing line between a complete ABC decline, and an impulsive decline that would suggest a larger trend change.

We broke that low, and at that point assumed the trend had changed to down.  On Monday, I discussed that we would head forward under the assumption that the trend had indeed changed, and that it was even possible we were ultimately headed for a big decline.

Then on Wednesday, I gave two near-term targets:

If B/2 completed yesterday, then we would expect SPX to head toward a first target in the mid-2820's, with a shot at a second target in the mid-2780's.

And SPX closed the session at 2785, which is about as good an outcome as any prognosticator can ever hope to achieve.  I also (again) noted that it was possible ALL OF the long-anticipated B-wave had completed at the recent all-time high, meaning we were ultimately headed into the 2500's.  Given the "mini-crash" nature of the decline so far, I think that's the assumption we have to operate on.  The charts seem to agree, with BKX showing a pattern that rarely bottoms immediately (on an intermediate basis -- this does not preclude near-term bottoms of course):

INDU was always the "tell" for me, and its pattern at the 2018 low is the reason I clung to the B-wave as the preferred count even after SPX hit new all-time highs:

The "textbook" target for SPX would actually be in the low 2400's.  I can't promise we'll get there, of course, but that would be the "usual" expectation.  The last leg of the current decline was clearly an extended fifth, so I'm curious if SPX will mount a larger rally here.  With extended fifths, it's hard to tell sometimes, as the wave can just keep stacking extension upon extension and decline relentlessly:

In conclusion, the price action suggests we have indeed entered the long-anticipated C-wave decline.  C waves are sometimes called "crash" waves, so bulls should maintain extreme caution until there are signs of a meaningful bottom.  Trade safe.

Wednesday, October 10, 2018

SPX Update: Still Looks Good for Bears

No change from the last update:  It still appears bears have control for now.  That can always change, of course, but for the moment it appears the most reasonable question is whether bulls can muster a bit more of a reaction bounce before the next leg down kicks off.  There are enough waves for a complete corrective rally already, if the market wants:

In conclusion, bears continue to hold the edge for now.  If B/2 completed yesterday, then we would expect SPX to head toward a first target in the mid-2820's, with a shot at a second target in the mid-2780's.  Those target levels would change (higher) if SPX manages to bounce higher for a more complex corrective B/2.  Continue to keep in mind that in the event the much larger B-wave completed at the recent all-time-high (still uncertain), then SPX is ultimately headed toward the low 2500's before it's said and done.  Trade safe.

Monday, October 8, 2018

SPX Update: Bears Get a New Shot

On Friday, we discussed what was needed for an impulsive decline, and I drew a black "4?" and "5?" on the chart where the market would be likely to turn IF it was going to form an impulse down.  SPX opened higher, hit the black "4" label and reversed lower, then made a beeline for the black "5?" label -- and then bounced.

This thus gives bears the most hopeful-looking pattern they've had in weeks.  While it's always possible the decline is wave C of an expanded flat, that presently appears to be an underdog, so we'll treat this as a likely trend change, at least in relative terms.

The big question is whether the larger B wave completed at 2941.  If that's the case, we would expect the 2018 lows to be revisited before this decline completes.  That's a little ahead of the game right now, though, so we'll take it one step at a time.  In other words, for the moment, we will presume that the market probably needs at least one more similar-sized wave down before bulls get a decent shot at turning things -- and we'll remain aware that it's possible for this to turn into a much larger decline.  Trade safe.

Friday, October 5, 2018

SPX Update: Inflection Point

Last update we talked about the potential for a triangle, and noted that the 2941 level was critical to confirm that pattern.  SPX stalled just shy and reversed, revealing the "potential triangle" to be a complex wxy correction.  Which means that, in the end, my initial read from 9/26 was correct.  (Most of the time, my first read is the right one.)

Question now is whether the correction is over and on to new highs, or if the decline will become impulsive. 

In conclusion, yesterday's low appears to be critical for bulls, as it's the dividing line between a complete ABC decline, and an impulsive decline that would suggest a larger trend change.  Trade safe.

Wednesday, October 3, 2018

SPX Update: Potential Triangle?

Since last update, the pattern has turned into an overlapping chop zone, which suggests the possibility of a triangle.  For once, all the subwaves fit for a triangle pattern (each subwave in a triangle needs to break down into a 3-wave (or corrective; WXY works too) move, and the subwaves on this pattern appear to do exactly that.  The question then is whether it's a bullish triangle (more common in this position) or a bearish b-wave triangle.

The bearish b-wave would likely only be near-term bearish, as it would suggest a c-wave down to follow the current move, and then new all time highs.  Of note, INDU has already its September high, and most of the time that means SPX will follow soon thereafter.

Of course, the pattern could yet develop in a way that renders the bear triangle moot and turns into something more bearish -- we'll just have to see how the next couple sessions develop.

In conclusion, we do have some clear levels to watch for the next couple sessions, and some potential targets if those levels are broken.  Also worth noting that if this IS a bull triangle, it would suggest that the next rally will be wave 5 of (something), since triangles are almost always the penultimate wave in a waveform, which could then turn into a decent correction after the upwards thrust completes.  Trade safe.

Monday, October 1, 2018

Update Schedule

I had family in from out of town last week, and they ended up extending their stay for a larger family activity, which pressured the update schedule.  Consequently, the update will return to its regular schedule on Wednesday.  Thank you for your patience!  And trade safe.  ;)