Friday, February 21, 2020

SPX and INDU Updates: C-wave After All?

Well, this is an interesting conundrum.  In the recent past, we've been watching for the possiibility of a B-wave high, to be followed by a C-wave decline, and the market has repeatedly flirted with the idea.  On Wednesday, the market briefly broke above the resistance zone, but it failed to hold that breakout, and collapsed sensationally on Thursday.  It then recovered a good chunk of that decline into the close.

Amazingly, despite that steep drop, the decline is only three waves down (so far) in SPX, and TWO sets of three-wave declines in INDU (a correction known as a WXY is two sets of ABCs strung together by an intervening three-wave rally) -- so while things look somewhat promising for the C-wave decline, we (as yet) still have no impulsive (five-wave) turn to confirm that idea.

In INDU, we can clearly see two three-wave declines:

In conclusion, if SPX and INDU can form new lows, we'll have our first early hint that perhaps the large C-wave will materialize after all.  Yesterday's low does mark something of an inflection point, though, so if the markets cannot make a new low, we would have to entertain the possibility of a completed correction at yesterday's low.  Trade safe.

Wednesday, February 19, 2020

SPX and INDU Updates

Since last update, SPX has continued wrestling with the 3383+/- resistance zone that I called out a while back.  So far, there's no larger impulsive decline to add confidence to the near-term bear option of an expanded flat.  INDU most clearly seems to illustrate the (so far) three-wave nature of the decline:

SPX, on the other hand, now has three small impulse waves down from the all-time high.  This suggests a sustained new low could be part of a bear nest.  The bull option is for a "double three" correction (that would become confirmed if SPX makes a new ATH).

In conclusion, SPX has remained stalled in this zone, which does at least confirm the read of 3383+/- as resistance.  What it does not tell us yet is if that zone will continue remain resistance.  The more a zone is tested, the weaker it tends to become, as the market works through sell orders (or buy orders, when dealing with support).  Bears need to sustain a break of Tuesday's low -- but if they can, that would help their case greatly.  If bulls can instead power up through resistance and hold the breakout, then the near-term bear options would be reset.  Trade safe.

Friday, February 14, 2020

SPX and INDU Updates

Last update talked about 3383 +/- as the next significant resistance zone for SPX, and two interesting things happened at that zone since.  First, the futures market tested that zone and then dropped like a rock.  Cash then recovered the drop yesterday, and rallied right up to that zone, where it stalled again.  Which is where we find ourselves today.

I had some trouble with this first chart, because Stockcharts suddenly decided that the ability to save your work was a stupid feature that they've been meaning to do away with anyway, so I had to screenshot it, since I couldn't save:

I also decided it was probably time to update the long-term chart, because I haven't done so in a few months, and INDU has come very close to its second target (originally published in July):

Long-term SPX does appear to have firmly entered the green channel, which we discussed in December:

In conclusion, the market is now testing a resistance zone.  Keep in mind that even if it breaks briefly above, it will need to sustain that breakout.  Long-term, the trend remains unchanged.  Trade safe.

Wednesday, February 12, 2020

SPX and INDU: Blogger Glitches and the Market

Wow, some weird Blogger glitch just deleted my entire piece here, so I have to start over with minutes until the open.  Lovely.

Anyway, as I was saying, in the last update, things were looking reasonably good for bears, but the market had not yet sustained breaks of any of the key levels we were watching.  As fate would have it, those key levels proved to be significant support and the market bounced up to new highs from there.

Predicting B-wave highs and C-wave declines is always difficult business, which is why I titled the original post "Out on a Limb."  If bears are going to make a stand on that count, then they probably need to prevent bulls from sustaining trade north of 3383ish.

In conclusion, bulls aren't out of the woods just yet... but given that we know (or continue to believe we know, anyway) that the larger degree trend is up, it's tricky business predicting countertrend declines, so my long-standing advice of awaiting an impulsive decline continues to hold.  We should have a clearer idea in the next few sessions as to whether bears are going to show up soon or not.  Trade safe.

Monday, February 10, 2020

SPX and INDU: So far, so good

Last update went out on a limb and predicted that we were at the beginning of a new wave down (likely a large C-wave to completer a complex fourth).  Bears did briefly break their first key zones, but have not yet sustained those breakdowns.  They may do so today.

No change, and the all-time high is now the key zone bulls need to reclaim.  INDU broke its red trend line, and is testing the first blue line:

SPX briefly broke 3325, but closed just above it:

SPX has begun to whipsaw the red breakout, which is a good step for the bear case:

Finally, I don't know if I remembered to mention when SPX captured its downside target, which was the 50 day moving average (red 4 wave previously placed right at the spot where it bottomed), but this chart remains relevant because (if the C-wave decline idea is correct) it may now test the lower black trend channel or thereabouts:

In conclusion, no material change from last update.  There's simply no way to EVER say, "Oh, this is definitely 100% the correct prediction," but so far, everything is going the way bears need it to go.  We'll see if they can keep that up.  The first meaningful zone for bulls is the all-time high, though a brief break of the all-time high would NOT immediately negate the preferred count, sustained trade above the all time high would certainly cast it into doubt.  Unless that happens, or unless the market shows strong signs of bottoming, I'll continue to favor the C-wave decline as shown.  Trade safe.

Friday, February 7, 2020

SPX and INDU Updates: Out on a Limb

Last update noted that:

One ongoing possibility is for the low in SPX to be a b-wave low instead of an impulse, which would put the market in a complex 3-3-5 flat. Such a flat could make a new all-time high, then reverse not too long after and retest the recent low.

For now, that's the count I'm going with, though the first step bears need to accomplish is a sustained breakdown at 3325 in SPX, and sustained breakdowns as shown below in INDU:

IF the C-wave decline is correct, it could play out something like this:

SPX would count as follows, and would follow a similar path to INDU. If this count is even correct -- and so far, we don't have an impulsive decline, so this could either be wrong, or be early (the rally could continue a little higher if it wanted without causing problems for this count immediately).

In conclusion, long-time readers know that it's rare I only publish one count, so keep in mind that there are many caveats here, and I can't guarantee that the rally doesn't continue unabated.  Nevertheless, for the time being, the count shown above is the count I'm going to favor until the market says otherwise (a significant continuation of the rally would create problems for the above count).  As noted, there are some early key levels to watch (3325 SPX, INDU trend lines) that would help add slight confidence to this count.  If the market holds those levels, then patience is probably in order.  Trade safe.

Wednesday, February 5, 2020

SPX and INDU: "More of a Wrench"

Last update discussed the potential for a bounce to begin immediately, but theorized that such a bounce would probably result in another wave down.  We've had a massive bounce since, and today are likely to open near the all-time high, which is going to make things a little tricky.  One ongoing possibility is for the low in SPX to be a b-wave low instead of an impulse, which would put the market in a complex 3-3-5 flat.  Such a flat could make a new all-time high, then reverse not too long after and retest the recent low.  (If SPX stalls shy of the all-time high, that would keep the impulsive decline on the table).

INDU turned right at the 3/C inflection point, which also leaves similar options.

In conclusion, the wave I discussed in detail last update -- blue 4 -- may throw more of a wrench into things than I had initially anticipated.  If that wave is indeed a b-wave, it opens up the potential for any new all-time high to be followed by a fairly direct reversal back toward the recent low.  (And the caveat:  In the event that SPX clears the all time high on increasing momentum, then we'll have to call all near-term bear cases into question, but we'll burn that bridge if we come to it.)  Of course, if SPX stalls shy off the all-time high, then that would make things more simple for bears (and make this test of the high an obvious short op)... but we're so close to it that a discussion of other options was well-warranted.  Trade safe.