Wednesday, June 20, 2018

SPX Update: It's a Mad Mad (Mad Mad) Market

On June 13, I wrote:

One would think that if this is indeed still a bear pattern, then it may complete today.

At worst, that date marked a decent turn and a tradeable high, so we'll call that a hit.  At best, something more bearish has begun.  (Or vice-versa if you're in the bull camp, of course.)

Due to the pattern off the high of June 13, we still can't confirm whether (2)/B has entirely completed or not.  It's worth noting that SPX found support at the lower boundary of the diagonal, and diagonals sometimes have a habit of tacking on another wave or two at the end to really mess with everyone.  Because the decline has not taken an impulsive form so far, we cannot yet rule that out.

In conclusion, SPX reached a downside inflection point yesterday, and bears would like to see that low broken to begin to add confidence to the immediate bear case.  Until then, we cannot rule out some additional upwards chop.  Trade safe.

Monday, June 18, 2018

SPX Update: Short and Sweet

Short update today, as there's no material change.  So far, so good:

In conclusion, the first warning bears would want to watch for is a sustained breakout over the recent high, though do keep in mind that one more small high still remains possible.  2825 is still the key invalidation level for the ending diagonal.  Trade safe.

Friday, June 15, 2018

SPX Update: The First Glimmer of Hope for Bears

A few updates back, I wrote that we'd await an impulsive decline before calling a top, so I'm not officially "calling a top" here, because there's no way to confirm anything this early, but I will note that we're finally starting to see some signs that the rally may be out of steam, or very close.

I would anticipate that Wednesday's low will be broken on the downside in the next session or two.  I can't recall the last time I posted anything along those lines, because this is the first time I've seen a solid near-term pattern pointing lower in weeks.

Now, I can't rule out that said pattern will end up being a micro fourth wave, but having a pattern that seems to point lower even for the near-term is the first real signal of any kind that bears have had in a while.

In conclusion, it's too early to know if this is the final end of the rally, or just a brief pause (ideally the end would still be close either way) -- but since we've been anticipating that the rally is a terminal rally, then this could be the first building block into a larger decline.  In other words, that outcome is at least a possibility from here.

And "at least a possibility" is more hope than bears have had in weeks.  Sometimes the most precise way to express one's views in a sloppy pattern like this is to say that the market is likely "closer to a top than to the bottom" at this point.  Trade safe.

Wednesday, June 13, 2018

SPX and INDU: Market Finally Reaches the Inflection Point

Yesterday was yet another riveting session filled with excitement, as SPX traded within an 11 point range, and ended the day up more than FOUR entire points!  If this market doesn't get your blood pumping, I don't know what will.

Despite the incredibly boring market of late, today is a Fed day, so that usually means we may see some genuine movement.  Fed days are known for fake-outs, and Fed Chairman Jerome Hayden "Jay" "Powell to the People" Powell Jerome Nedyah Jay, Jr., DDS, CPA, PhD. is still an X-factor as far as the market is concerned -- especially given the complexity of his name alone -- so that may bring additional volatility.  Usually after 2 p.m. Eastern.

There's still no material change to anything, though it's worth noting that SPX is finally into the ballpark of the long-standing red (2)/B label:

INDU would look a little better with at least slightly higher prices:

In conclusion, it's interesting that this pattern has finally reached its major inflection point, and that inflection point "just happens" to align perfectly with today's Fed announcement.  One would think that if this is indeed still a bear pattern, then it may complete today.

Keeping an eye on the other side of the trade, though:  If bulls are going to pull out a stunning last minute upset, one would likewise think that this week would be where they make that plan known.

It's worth noting that the market has seemingly struggled to rally, taking more than two months just to retrace the March decline, which only took about two weeks.  More often than not, this struggle to move suggests a move that is counter to the larger prevailing trend.  Trade safe.

Monday, June 11, 2018

SPX and INDU Updates

SPX has continued to move in the "two steps forward, one step back" style that is common inside diagonals (it's also common in bull nests! -- right up until they finally break out and run relentlessly higher), and thus the market has continued to annoy pretty much everyone.  There's no material change from the past couple weeks of updates:

It is worth a mention that this is what we've been expecting the market to do since way back in early February.  I lost track of how many times I warned about a double retrace and that "all roads lead to (2)/B."  The market refused to take anything resembling a straightforward path, but it's interesting how closely it ended up following a chart I originally published back on February 6.

Here's the chart from February 6, showing my "best guess" blue preferred path (keeping in mind that I never intend these to be "time projections" unless specifically noted -- I simply work within available chart space):

And here's what actually happened/is happening:

Thus, while this move hasn't exactly taken the straightforward path, it has followed the broader path that we laid out immediately after the January/February mini-crash remarkably well.

From that perspective, this move should come as no surprise.

As to the present:  Basically, at this point, bears don't want to see SPX sustain trade north of 2825, because (as noted) that would invalidate the diagonal.  Now, a break of 2825 does not invalidate all bear patterns, but given that a bull nest remains possible, bears should avoid complacency.  Once we see the first impulsive decline, we can consider calling a top -- until then, the market can continue its upward climb.  Trade safe.

Friday, June 8, 2018

SPX and Oil Updates

A week ago, I discussed that we should probably anticipate an overthrow of the upper red trend line on the SPX chart, and that has finally happened:

Interestingly, Crude Oil reached, and reacted to, a target/resistance zone that was correctly identified nearly 8 months ago.  At the beginning of May, I noted that we were in the target zone, and we've turned from that zone since then.

In conclusion, SPX is getting into the ballpark where a diagonal (if that's what this is) could complete, but we do not yet have an impulsive decline to confirm its completion.  Thus, at the moment, we can't rule out some additional thrusts higher, because the invalidation point is still a ways off at 2825.  We'll see how it develops from here.  Trade safe.

Wednesday, June 6, 2018

SPX and BKX: More Fun than a Backyard Barbeque

SPX has continued to be more fun than a backyard lava fountain, but decidedly less spectacular.  Frankly, if I had been trying to do much trading during the past month or so, I would probably hate this market.  As it sits, I decided to step back a bit when things got squirrely at the start of May, so I'm mainly just getting bored with this choppy pattern.  Since May 29, the market has moved higher primarily via overnight gaps, but then just grinds around when the cash session opens.

This is a good recipe for a pending strong move in one direction or the other.  The lack of daily progress suggest bulls and bears fighting it out; so when one side finally runs out of firepower, the market should have room to run against the losing side.

The pattern between the red lines below is typically bi-modal as a result.  It appears to be either a bearish ending diagonal terminal pattern, which would typically retrace to the bottom of red (ii) in one-third to one-half the time it took to form (the clock starts when it completes), or a bull nest (a strong launchpad).  Again, 2825 appears to be the dividing line.

Another market worth keeping an eye on is the Philadelphia Bank Index (BKX), because it could suggest significant weakness if it breaks down:

Some readers have asked about whether the Russell 2000's (RUT) new highs mean that SPX is "certain to make new highs too!"  But that's a somewhat misguided look at things.  There's a reason that most analysts don't use the RUT as their guide for the broad market -- the dollar volume traded in RUT is extremely low compared to SPX.  It is worth mentioning, though, that INDU still hasn't exceeded its May highs.

In conclusion, we'll continue favoring the ending diagonal by a narrow margin unless and until the market tells us not to.  Trade safe.