Wednesday, November 22, 2017

SPX and INDU Updates

This market has been quite a bit more fun than riding in a one-horse open sleigh when you're soaking wet and it's -40 degrees out.  And your horse is rabid.  And your sleigh is made of razor wire.  And you're being pursued by Evil Elves who have Janet Yellen's face on their otherwise-normal little elven bodies.  And they're wielding rocket launchers.

Last update noted that the prior decline was an impulse, and caveated that it could be an expanded flat c-wave -- and of course it was an expanded flat c-wave.  Then SPX went on to best the all-time-high.  And now it has answered exactly nothing, because the discussed (B) wave is still possible, but it's also possible that we're already in red 3 (which was the prior alternate count).  The only plus is that I believed from the beginning that the last dip was corrective, and at least now we know for a fact that this was correct.  I guess, to be fair on myself, I did warn repeatedly that the prior chop zone made the near-term increasingly difficult to predict -- but I'm still bugged.

It's interesting to note that INDU managed to work off its severe overbought condition without giving up much in the way of price.  As I indicated in October, when a market gets that overbought, it's actually a fairly reliable and bullish signal that continued upside will follow the next correction.  It will be interesting to see if INDU mirrors its behavior from a year ago in this regard:

In conclusion, the question we all want answered is:  How do we tell now if this is a (B) wave, or if we're already in red 3 and headed toward the next targets?  The only real answer is that bulls probably need to see some fairly immediate follow-through.  Frankly, there's almost nothing harder than trying to predict an expanded flat B-wave -- so this either is or it isn't, and the market simply has to lead from here. 

Either way, Happy Thanksgiving to all my readers!  Trade safe.

Monday, November 20, 2017


So we have an interesting battle shaping up in the market.  Traditionally, the week of Thanksgiving is one of the most bullish weeks of the entire year.  But SPX appears to have formed an impulse down from 2590 -- so unless that's the c-wave of an expanded flat, it suggests another wave down is pending:

A couple readers have asked for an update on RUT, but the recent decline in RUT is "uncountable," so I don't have a strong opinion on whether it's complete or not.  It is worth noting that the black trend channel is what arrested the decline, so if that fails, it would probably suggest some downside follow-through:

In conclusion, the most recent decline from 2590 SPX was almost certainly impulsive, so that suggests another leg down will follow the next bounce.  Countering that is the fact that Thanksgiving week is traditionally very bullish -- along with the alternate bull count for a completed correction at 2557.  Nevertheless, I can only "trade what I see," and what I see is an impulsive decline from 2590 to 2578, and nothing concrete to make me doubt that.  Thus bulls need to claim 2591 to trump the apparent impulse and its suggestion of another wave down.  Trade safe.

Friday, November 17, 2017

SPX and INDU Updates

Last update, I was so certain that we'd rally up north of 2586 SPX that I drew that path on the SPX chart and the INDU chart -- and then, just to keep us on our toes, SPX dipped briefly below 2566 before rallying up into the B/(2) target zone.  I cannot even begin to express how difficult it becomes to predict a market that has made as much noise as this one, so please keep that in mind when we look at the projections below.

Let's start with INDU:

SPX would be expected to behave in a similar fashion:

In conclusion:  The bull alternate on both charts is that the decline/correction is entirely complete and we'll head straight on to new highs from here in a decent third wave.  I'm not favoring that -- if we were to make a new high, my first suspicion would be that it's still a B-wave (a second wave would be off the table).  So I'm still inclined to think we need at least one more wave down to complete this pattern -- and possibly more than one.

The biggest challenge is determining exactly WHAT this mess is trying to correct.  Due to the noise leading into the all-time-high, we may be correcting a higher degree wave than the conservative (C)/3 projection shown on the chart.  It's simply not clear, and we'll just have to take it as it comes.  Trade safe.

Wednesday, November 15, 2017

SPX and INDU: Bears Want More Credit

Last update discussed the potential pattern in BKX, and that the bear options had to be given at least even odds.  And now we may have to go one notch further and shift preference to the bears here.  INDU made a new low yesterday, so the only way its downward decline could be complete is if it's a double-zigzag.  So, it's not impossible for bulls to hang on here, but the new low makes it less likely. 

INDU's new low yesterday looks very much like a b-wave, suggesting a near-term rally, perhaps to fill the gap.  And then another leg down:

I've adjusted SPX's chart to match the message from INDU, so while there are still three possible counts out of this mess, we probably have to give at least slight odds to the bear counts:

In conclusion, while I've drawn rather specific paths on the two charts above, I do want to caution readers against becoming too attached to those paths.  We have been in an extended chop zone for a month now, and predictions drawn from chop are the hardest to make, and the most likely to fail.  That said, I will commit to saying that I think we have to tilt the balance to the bears for another leg down.  The nice thing is that if we get the rally shown on the charts above, there will be a low-risk entry zone in the near future -- and given that we're hoping black (2)/B will put in a decent near-term rally, an invalidation (if it's not (B)/2) won't cause too much pain.

In the event the market continues to rally past the black (B)/2 on the above charts and makes a new all time high, then such a move could still be part of black B, but (2) would be off the table.  Conversely, in the event that yesterday's low fails immediately, then we have to stay aware that (B)/2 could already have completed as a running flat -- though the ultimate head-trip would be for a breakdown that then rallies up to (B)/2 before dropping for real.  And I wouldn't put that past this market at all. 

In any case, the downside potential for this pattern currently stretches as low as 2480-2500, though will likely have to be adjusted once we see where the final high for (B)/2 actually is -- if that's indeed what's unfolding.  Trade safe.

Monday, November 13, 2017

SPX and BKX: The Plot Thickens

Friday's session accomplished nothing in SPX, but we do have an interesting development in BKX.

The last time I updated the BKX chart was in July, and I noted that I was inclined to think red iv was still unfolding.  Since then, I've been wondering about the wave structure here, because blue V should be an impulsive five wave rally, and it has had the appearance of 3 waves instead.  That leaves open the potential that the most recent rally in BKX was not part of wave V, but was instead the still-unfolding wave iv.  The new high in 3-waves would fit the expectations of an expanded flat, and suggest a trip back below the a-wave low.

I can't rule out the idea that wave V is still underway, but the expanded flat would fit quite well here, so we have to give that even odds for the moment:

Now, if wave iv is still unfolding in BKX, then that would suggest a decent decline is pending there.  And that would likewise have implications that SPX is also still working on a large fourth wave, which is represented by the bottommost black 4 on the chart below -- but could easily run lower than shown (and probably would, in fact).

These types of moves are quite challenging to anticipate, because there really is nothing to differentiate them until they start breaking up or down -- but we are at least wise to the potential fairly early in the game, especially relative to the ideal size for this wave.  As I warned last update: If SPX sustains a breakdown at blue C, that would have to be viewed with extreme caution.  And now we have one more reason for thinking so.  The classic target for an SPX breakdown would be 2537 +/-, but that could easily run into the 2400's.

The biggest challenge when you start dealing with expanded flats is that you cannot bank of a fifth wave at the anticipated C-wave decline -- because that "expected" c-wave could instead be another b-wave, and end up as three waves that lead to another up/down sequence.  So please keep that in mind in the event of a sustained breakdown.  The good news is that even if the decline were to be another b-wave, we should still theoretically be able to bank on a wave of at least equal length to the first leg down, likely longer.  Trade safe.

Friday, November 10, 2017

SPX Update: Far from Clear-Cut

In the prior update, I warned of the potential for an expanded flat, and the market dropped to within 2 points of the expanded flat target zone.  But it didn't quite get there, and that leaves some questions on the table.

First, let's look at the longer-term chart.  Readers will recall where black "alt: ii" was the last time I updated this chart (hint:  it was right where "red ii" is now):

In a perfect world, that would be it, and everything would be wonderful from here on out -- but this is not a perfect world.  There are markets where you can say, "Oh yeah, that's it, we're now headed to X..." -- and then there are markets like this one.  This is an anti-complacency market right now, as we'll see on the chart below:

In conclusion, there are still plenty of ways for this market to cause pain, not the least of which would be the aforementioned ending diagonal.  The thing that bothers me is that blue C looks more like a 3-wave move than an impulse.  And it's supposed to be an impulse.  If I really stretch my brain, I can find a way to count it as an impulse, but we have to at least consider that maybe it simply isn't -- which would mean that it's the ABC of wave I of a diagonal, or it's the ABC it appears to be, to mark black (A).  Or, and here's one for the bears... or it's part of a bear nest.  This is why any sustained breakdown at 2566 would have to be treated with extreme caution.

The first warning on the chart above would be a sustained breakdown at the blue trend line -- if that fails, then 2566 would have a good chance of failing as well.  Trade safe.

Wednesday, November 8, 2017

SPX Update: A Couple Near-tem Options

Last update expected higher prices after a morning dip:

I suspect SPX will decline at the open, toward 84, and potentially as low as 80-81, before rallying back up.

Turned out I was off by a point, and SPX declined to 85 before resuming the rally.

We've now reached a somewhat odd inflection point, inasmuch as I don't see much potential for a long-term top here, but I do see potential for two possible near-term corrective structures.  I've drawn a chart to show the potentials, as well as to discuss the relevant levels for each:

While I don't see much potential for a long-term top in the charts, Dennis Gartman did just announce that he was finally turning bullish -- so we should be aware that a sudden crash of at least 2590 SPX points is not entirely out of the question.  ;)

In conclusion, basically, as long as the zone near yesterday's low holds, then we have to presume bulls still have the ball across all time frames.  If we instead see a sustained breakdown at the blue trend line on the chart above, then we'll have to consider that perhaps red wave 2 is still underway via the blue ABC.  Trade safe.