Friday, May 26, 2017

SPX Update

Yesterday, SPX cleared the ATH and ran to the next target zone of 2415-20.  This has at least helped clear out a couple options, but this remains a difficult market to anticipate due to the noise pattern that preceded the current wave.  Sometimes you can look at a pattern and make a clear call with Elliott Wave -- such as back in November 2016, when the call to 2400 SPX was clear because the pattern was clean.  Sometimes, you can instead discuss probabilities.  And other times, all you can really do is discuss possibilities -- but even this has value, because it is often still able to identify potential turning points, which allows one to avoid things such as going stubbornly long right before a possible top and vice-versa.

Due to the preceding noise pattern, we're bordering on the "discuss possibilities" zone, so let's start with a wide-angle view of the two leading options:

Moving in for a closer look, we find that the if/then equations of the past week have been helpful, since last Friday I suggested that a breakout over 2383 would lead to 2400, then noted that a breakout over 2406 would lead to 2415-20.  Since both of those targets were captured, that amounts to having the trend direction correct for 29 of the last 35 SPX points the market has traveled. 

(Note: typical typo -- "2315-20" should be "2415-20")

In conclusion, it's a little difficult to envision a decent-sized bull wave underway here, but "difficult to envision" is hardly grounds for declaring it impossible.  It most certainly is possible.  Interestingly, RUT and BKX are still well below their respective swing highs, and both of those markets continue to look relatively weak compared to SPX.  The question at this point is how much SPX can rally before, say, BKX needs to pay the piper and halts SPX's advance.  From an analytical standpoint, the problem with it being so far below its swing high is that it leaves a lot of room. 

I feel I have to default to the B-wave rally here, but there are no clear stop levels until we see our first impulsive move lower (which gives us the high preceding the impulse to act against), although first resistance is the current price zone (which was previously a target), so it's possible the rally will stall here.  Trade safe.

Wednesday, May 24, 2017

RUT, BKX, and SPX Updates:

Back in December of 2016, the Russell 2000 (RUT) hit a high of 1392, and from there it began its valiant journey to where it now sits -- more than six long months later -- about 12 points lower.  To call this year a "sideways grind" is an understatement.  The trouble with patterns like this is that the more complex they become, the more options for resolution open up.  And the more options open up, the harder it becomes to figure out which is the "real" option. 

There appear to be three waves into the high at 1425, and while that means it's probably a corrective b-wave high and thus likely to be bested at some point, it also means we have certain expectations for resolution of that pattern in the form of a decline.  Specifically, we would normally expect an impulsive c-wave decline, which breaks the low that began the b-wave (1335).  That hasn't happened yet.

But before we balance all our baskets on one egg, we have to realize that this is where things become difficult due to the preceding chop -- because there's no law that says RUT can't form an even more complex wave BEFORE that anticipated impulsive c-wave manifests.  In other words, it could even rally up to break 1425, then drop back down to 1335 -- or, and this is where it gets really fun (sarcasm), it could form several such waves, strung together over another few months, before we get resolution. 

Of course, there are more straightforward possibilities as well, and since those options better lend themselves to being charted (WITHOUT taking the radical step of hiring a blind crack addict with epilepsy to draw the lines), those are the options I'm showing below:

Since bulls currently have four green days to the bears' two red days in SPX, that means we are now contractually obligated to at least discuss a more bullish near-term possibility on the BKX chart.  This isn't a "done deal" projection or anything, because BKX has still only retraced about half the prior decline -- so the more directly bearish resolution shown previously is still alive and well and this is not intended to "overwrite" that option.  But I've already charted and shown that option previously, and it's essentially unchanged, so the chart below is for awareness sake:

Yesterday, SPX made good on Friday's call that a sustained break above 2383 would lead to 2400.  Now it's do or die time for bears, at least as far as a potential second wave goes.  Much like RUT, SPX has many options here for continued head-fakes and sideways yuck. 

We do at least have to realize that from a technical standpoint, a sustained breakout over the ATH could be a third wave headed significantly higher -- so at least be aware that's a technical possibility in the event the rally continues past the ATH.  And if you're a bear, then protect yourself accordingly. If the ATH breaks, then remember that you do not HAVE to take on risk, especially if you're uncertain what's unfolding -- cash is a position too. 

In conclusion, if bears want to keep the second wave option alive, then they need to make a stand directly.  This rally is not outside the realm of technical possibility for a bear wave, so all hope is not yet lost, and at least the obvious stop level for shorts is reasonably close.  The garbage end of the deal is that a breakout over the ATH won't guarantee a rally, due to B-wave potential, but it does open up the possibility of a strong rally, so that would make a breakout hard to trade, at least until there is a small impulsive decline to indicate a stop zone.  In the meantime, of course, bears still have the shot of stopping the rally here.  Trade safe. 

Monday, May 22, 2017

SPX Update: Through a Glass Darkly

Well, Friday's rally probably ran a bit too deep for a fourth wave, so either we're looking at a second wave rally, or we're dealing with the bull alternate count.  I still have a hard time seeing BKX making a new high from here, and it looks like it probably needs another leg down, but BKX is significantly below its prior swing high, which means it could rally without making a new high even if SPX were to do so.

Given the position of the market, I think today's update is best served with one simple, yet detailed, chart of SPX:

In conclusion, bulls have put up more of a fight than I think many of us expected, and appear to have tacked on an extended fifth to Friday's rally just for confusion's sake.  While this is hardly the clearest wave in history, the SPX chart above nevertheless valiantly attempts to outline the options in detail.  Presently, there appear to be three waves off the low, so if bears can make a stand here, then this could mark a complete ABC rally.  Trade safe.

Friday, May 19, 2017

SPX and INDU Updates: Near-term Level to Watch

I don't typically do Thursday updates, but I felt I owed my readers one after Wednesday's "non-update" (especially since this is potentially an important moment for the market), so if you missed that update because you don't check the blog on Thursdays, please refer to it here.  Today's update will be something of a continuation of that update and will only focus on the near-term, since the bigger picture across multiple markets was covered in considerable detail yesterday.

So, let's start off with a slight update to the INDU chart (I am doing a "slight" update to this chart because Stockcharts won't let me do anything else without DELETING all my prior annotations!)

Yesterday, this was the only specific near-term chart I published, and INDU bounced directly off the red iii I had placed on this chart.  It then proceeded to exceed the iv label I'd placed, but no invalidation levels were cracked on that rally, so it still fits just fine as a potential fourth.

Since I couldn't use Stockcharts to move the iv label to its appropriate location, I had to do that in Photoshop (!).  (Thanks for wasting my time, Stockcharts!)  The red iii label is still exactly where it was yesterday.

For SPX, I did a brand-new chart (thank you again, Stockcharts!).  On this chart, I've included the bull count that might fit this pattern.  I'm not favoring that count, but it pays to be aware of the alternate options.  I've also outlined the next important near-term level (2383), and what to watch in the event SPX were to sustain a breakout beyond it.

In conclusion, there isn't much to add to yesterday's reasonably-thorough update, except for a bull count just in case the market is doing something unexpected.  I will remain near-term bearish here unless SPX sustains a breakout over 2383, or until there are signs of a more significant bottom.  Trade safe.

Thursday, May 18, 2017

SPX, INDU, RUT, BKX Updates: Timing is Everything

Well, I'm pretty happy with the timing of Monday's update, and I hope my readers are too.  The warning signs I began seeing last month appear to have come to fruition, and it's hard to see yesterday's decline as anything other than a micro third wave, given how relentless it was.  On some markets, such as INDU and BKX, it may be a third wave at multiple degrees of trend, so this is a good wave to wait for clear bottom signals before attempting to get fancy and trade long against the near-term trend.

INDU's near-term chart shows how we may be inside a nest of (potentially) three first and second waves, which would make the current wave red iii of red 3 of blue 3/c.

BKX was warning us of problems back on April 30.  (Stockcharts is giving me grief and won't let me update this chart -- but it was labeled correctly on Monday, so there's not much to update, other than to delete the "or 2/b?"):

RUT was also warning us of potential problems a couple weeks ago:

And finally, I'm rather pleased with Monday's call for one final 4/5 unwind with a higher-high in SPX before a large reversal.  Considering other markets were already showing signs of heading lower, it wasn't the easiest call to expect a final higher-high for SPX alone:

In conclusion, the pending reversal I warned about in Monday's update showed up, and everything appears to be unfolding as suggested.  At the moment, there are no apparent signs of a bottom, and the odds are reasonable that we're only halfway through this decline.  Trade safe.

Wednesday, May 17, 2017

SPX Non-Update

Last update discussed the potential that one more higher-high might complete Bull 3, and while SPX fell about 4 points shy of my ideal target, we did get a higher high and a reversal, so that might be all she wrote for Bull 3, with the larger fourth wave correction I discussed now on deck. 

It is still possible for there to be one more small 4th and 5th left to unwind, but I'm not banking on that. 

I have to apologize, but we've had a lot of rain these past couple days, and my internet connection was barely functional today, so I was unable to update charts today -- but there's really not much to update, except -- as noted -- that with yesterday's new high, Bull 3 can now count as complete:

I'll attempt to do a more complete update for Thursday, internet connection willing.  Fortunately, Monday's update was pretty thorough, and the market seems to be playing along with my predictions.  Please refer back to those charts if needed.  Trade safe.

Monday, May 15, 2017

SPX, RUT, BKX, INDU: Giving the Bears Some Airtime

It appears that it's time to begin an increasing focus on the bear case, since a larger correction is likely drawing near.  SPX probably still has another fourth and fifth wave left to unwind (there's a slight chance that wave has already unwound, but that looks like the underdog right now), and thus may still make another higher-high, but the larger third wave rally we've been tracking since November appears to finally be nearing completion.

Accordingly, we're going to look mainly at bear signals that seem to be manifesting across various markets.  We'll start with the trusty SPX chart that has remained materially unchanged for the past 7 straight months:

Next, we'll look at RUT, which may be leading the way.

A larger view of RUT (continued, next page):