Friday, January 18, 2019

SPX Update: Zooming Out a Bit...

Last update warned that the near-term trend remained up, and yesterday, bulls launched a rocket over near-term resistance, finally clearing the rising chop zone the market's been stuck in for the past couple weeks.

Accordingly, it's best to pull back and look at the next potential resistance zones, in terms of the bigger picture:

There's really not much to add to the past few updates.  As I've been warning, bears should refrain from getting excited unless/until we see an impulsive decline, which would indicate at least a larger correction to the rally.  Especially since, as I outlined on Jan. 9, there's really nothing to prevent this wave from ultimately reaching new all-time highs.

I think all readers know that I've always labeled the current all-time high as a B-wave -- and most know that means I have always believed it's a corrective high (corrective highs are always retested or bested), not the final end of the bull market.  One way or another, we do ultimately foresee the market moving higher.  Whether the market wants to do that now or later is still the lingering question -- but so far, it's given little indication of weakness since the end of December, and until it does, we have to respect the present trend.  Trade safe.

Wednesday, January 16, 2019

SPX Update

Last update noted:

Futures... are suggesting a down open for the market.  But I wouldn't be terribly surprised if that goes nowhere (except back up toward the top of the recent range)

And that's what happened.  The market gapped down, but that decline stalled immediately, and went nowhere, except back up.  Bulls are now trying to break from the most recent chop zone, but have yet to make a clean break.  Their attempt yesterday found resistance at the red trend line.

This remains a very difficult fractal to predict, because I'm still not certain what the market is trying to accomplish here, and the last couple weeks have been anything but enlightening.

Accordingly, I will continue to warn bears that, until we see an impulsive decline, there's nothing to get excited about.  If this wave wants to turn into an impulse, then it can keep moving higher.  If it's only an ABC, then it could be close to completion, but it's better to await an impulsive decline for confirmation.  Even in that scenario, there's typically a rough retest of the high afterwards.  Until then, the near-term trend remains up.  Trade safe.

Monday, January 14, 2019

SPX Update: Surprise Market Close on Friday Spooks Futures at Sunday Open

Nothing at all happened on Friday, and I had to double-check my notes to make sure the market wasn't closed.  It sure traded like it was closed.  We haven't seen the actual price volatility this low in several months.

Futures are a little spooked now (since traders can't remember IF the market was closed on Friday, and if so, WHY), and are suggesting a down open for the market.  But I wouldn't be terribly surprised if that goes nowhere (except back up toward the top of the recent range) and the market remains range-bound.  If it DOES go somewhere, then maybe that will develop into a semi-meaningful pattern, so we can look at trying to predict the next move farther than 39 seconds out.

Accordingly, no change since last update:

In conclusion, the market's still in a holding pattern -- thus so are we.  It does remain technically possible for ALL OF a C wave to have completed at 2597, but the pattern since is unclear so far, so there's no confirmation yet.  Trade safe.

Friday, January 11, 2019

SPX Update: Short and Sweet

We are in the zone of at least a near-term inflection point.

This may also be an intermediate inflection, as there are potentially enough waves up to mark a complete (or nearly complete) ABC rally.  There are two challenges here, though:

1.  It's possible that yesterday's rally only marked wave I of 5, in which case we still need micro iii/iv/v of 5, which would likely take us toward 2650ish before it's all said and done
2.  We can't be certain that and "ABC" is the market's goal this juncture.  It may want a larger impulse, which would still need blue 4 and 5 to complete.

In conclusion, a breakout in today's session would likely suggest the rally continue for at least a couple more sessions -- but no breakout leaves bears at least some near-term options (either for a developing 4th wave lower, or for the end of the rally).  Trade safe.

Wednesday, January 9, 2019

SPX Update

Last update noted that if bulls could clear Friday's high, then there was little resistance in SPX until 2585-2600.  That level was hit by the E-mini futures in the overnight, so we'll see if the market reacts to that at all.  So far, bulls have just kept chugging along with this rally.

The next chart was one that I drew up for the prior update, and I'd intended to publish it with that update, then apparently forgot to upload it.

One of the traps I see Elliotticians fall into, time and again, is linear thinking.  It's easy to forget that just because one is expecting a c-wave decline (or similar) does not mean that the market has no other options.

There are times when both the near-term and intermediate-term require a resolution in one direction, and those are the high probability times.  Then there are times that can feel like a coin flip, because they almost are.  During the latter times, there will be "dead spells" where the market needs to do X in order to tip its hand, and unless/until it does, it's sometimes unwise to do anything other than ride the current trend until the market says otherwise.

The chart below shows one optional way the market could throw a major curveball here:

In conclusion, there are still no indications the rally is complete -- or even that it will do so -- but we are nearing the area where an ABC rally (IF that's what this is) could complete.  We'll stay alert to possible signals of that -- the first signal would be a clean impulsive decline that isn't part of an expanded flat.  Until then, bears need to continue remaining cautious.  Trade safe.

Monday, January 7, 2019

SPX and INDU Updates: Fed Fun

On Friday, Fed Chair Powell tried to reassure investors that the Fed would "listen with sensitivity to the messages markets are sending," and that the Fed "promised not to laugh, even if those messages contain spelling or grammatical errors."

The market promptly rallied 8,000 points in 38 seconds, as we largely expected it would if Powell offered a little hand-holding.

While Powell's words are no doubt reassuring, the question is, what is the market actually expecting the Fed to do, exactly?  Because Powell indicated no plans that they intended to slow down on the liquidity drain to pay off the outstanding $4.1 trillion Quantitative Easing (QE) debt that remains (accrued from 2009-14), or even that they would back away from continuing to jack interest rates like madmen.

And the Fed is historically behind the curve when it comes to spotting recessions, and tends to continue plodding along raising rates even after a slowdown is underway.  Then, months later, they announce, "We've determined that the latest recession actually began 27 months ago, right before we raised rates six more times.  The good news is:  The recession is already over!  Carry on."

In other words, the Fed's track record at ceasing rate increases isn't exactly stellar.  Now, what's interesting is that the U.S. interest rate futures market is already predicting that there will be NO rate hikes in 2019, despite the Fed's (as far as anyone knows) continuing intention to have two rate hikes -- and the futures market is on the border of actually predicting a rate CUT for 2019.

So the question is:  What bullets does the Fed have right now?  The market is already presuming the best case scenario, so the Fed can really only disappoint in that regard -- so bulls may be getting ahead of themselves.  Probably the only bullet the Fed has would be to announce a stay on the aforementioned QE roll-offs.  But right now, that would seem to be the furthest thing from the Fed's collective hivemind, so I imagine it would take a truly awful scenario for that to happen.

Anyway, just some food for thought.

Chart-wise, I still don't like the look of things.  October through December was easy money, and I kept calling for significantly more downside -- but now, things are not so clear.  This is how the market works, and we can't expect to be able to predict it every minute of every day.  Things will clarify again when they're ready to, and we won't miss much in the interim.

That said, let's take a look at the potential bad news for bulls, which is mainly found in the RSI readings:

On the flip side, there's just nothing in this pattern that screams "complete!" yet, but I can see a few options for bears if the market reverses soon:

To give an idea of why I'm hesitant to assign a preferred wave count at this juncture:  One option for bears is for a complete WXY rally (done or nearly), another is for a b-wave rally to be complete or nearly so, which then heads down toward 2430 before reversing to put in another wave higher (north of current levels), thus completing the entire upside correction.  And the bull option is for this whole thing to be a nest of 1's and 2's to continue to launch higher -- but I have to assign that the lowest probability of the three at this point, because the longer-term chart seems to argue against it.  Nevertheless, I can't rule it out, so bears shouldn't be too complacent here.

In conclusion, the wave counts remain unclear, so we'll simply have to take it as it comes for now.  Trade safe.

Friday, January 4, 2019

SPX Update: Fed, Jobs, Inflection Point

Lots going on today that has the potential to move the market.  Nonfarm payroll was released before the open, and showed another very strong number, which may help mitigate recession fears among some.

As we know, though, the market is not directly driven by the economy, but is instead driven solely by liquidity, which MAY result from a strong economy.  But that can be mitigated by other factors:  in this case, the interesting ongoing factor is that the Fed continues to drain liquidity from the system as they pay off the Quantitative Easing programs that lasted from 2009 until 2014.

As most readers know, during that time the Fed added a completely unprecedented $4.5 trillion to their balance sheet, and that money largely drove the stock and commodity rallies we saw during that time (as most recall, the real economy was still pretty weak -- most of the "jobs" being created from 2009-14 were on the order of "part time fry cook").

The Fed has been rolling off (paying down) that debt for the past year plus, and -- amazingly -- the market still hasn't crashed.  This is a testament to the strength of the REAL economy (for the first time in decades), because the real economy is generating enough liquidity to offset the Fed's negative actions and at least keep the market more or less steady.  So far, anyway.  Those who lament the market's negative performance of 2018 have no idea how bad it COULD have been, in a weaker economy.  Early on, just looking at the pending Fed liquidity drain, many were worried about a 2008 redux.

And, to be fair, we're not out of the woods yet.

Powell speaks today, and his tone may further impact the market.  Many of us believe that the Fed raising rates ON TOP of draining QE is too much to ask of the market -- so if he takes a dovish tone, that would help equity investors feel a little less like the Fed is actively attempting to crash the market.

Chart-wise, the market continues to remain range-bound, and has thus kept its options open.

In conclusion, we're still stuck at an inflection point, but if the correction to 2447 was bullish, then there are enough waves down and the market is free to rally to new highs from here.  If that level (2447) breaks, then bears have options to regain control of the intermediate time frames.  Trade safe.