Monday, August 20, 2018

SPX Update

No material change since last update.  Due to the potential expanded flat that I warned about on August 8 (and which did ultimately pan out from slightly higher levels), there are no meaningful upside price levels in SPX until the all-time-high.  Which is interesting, inasmuch as it seems like a lot of folks have grown quite bullish here -- beneath a major resistance zone that's contained the market for half a year.

Near-term, the expanded flat means the market can rally back above 2863 if it wants and that would not gain it any technical advantages.  The all-time high is the level SPX must sustain trade and closes north of, for bulls to gain confidence.

In conclusion, trade above 2863 would reset the smaller red "bear 1/a" and "bear 2/b," but not the larger red (2)/B.  Trade north of the all time high would reset the large red (2), but not the red B (see recent expanded flat from black bull a to black bull c to understand why).  There's really not much to add here beyond that.  The wave since the April low has been a mess and hasn't really taken the form I'd like to see in terms of clarity, but since this retest of the high has been something I've anticipated since the February lows, the market has given no reason to shift stance.  Yet, anyway.  Trade safe.

Friday, August 17, 2018

SPX Update: Downside Inflection Zone Captured; Important Decision Time for the Market

It's been a solid week of hits for the updates, with Wednesday's decline capturing the broader expectations of black bull:c, which I had noted I was favoring one way or another (technically the decline fell 2 points shy of the official 2790-2800 target, but close enough for government work).

As also warned, SPX bounced strongly from that zone, and has finally now tested the 2850 upside zone, which was also something I mentioned I'd be watching for this week.  So the market is now sitting in the bounds of a pretty important inflection zone:

In conclusion, both the bull and bear counts anticipated a decline toward black bull: c, so things do get a little less easy now.  The near-term pattern on SPX leads me to suspect that we'll head in the downward direction early in the session, but it remains to be seen how bulls will react to that.  Overall, I'm slightly inclined to continue favoring the bears as long as the all-time high holds, but this is an inflection point, so stay nimble, and trade safe.

Wednesday, August 15, 2018

SPX Update: Bears Appear to Have the Ball Now

The last two updates have been hits, with Friday capturing the mid-2820's target on SPX, and last update choosing to go with "gut" over charts (while expecting lower prices).  Since both those were on target, there's no real change in that I suspect we're headed toward the 2790's at the minimum.

Bears do now appear to have an impulse down working in their favor, and that will be the dominant force on the charts for the time being.

In conclusion, there's no real change from the prior few updates, and I suspect the market will want to test the 2790-2800 zone one way or the other at the minimum.  Keep in mind that it is also very possible that ALL OF (2)/B has completed, in which case things could get ugly.  Trade safe.

Monday, August 13, 2018

SPX Update: Bears on the Cusp of Control

Last week's rally was, so far, strongly rejected at the test of the zone near the all-time high.  The decline since then is only three waves at this point, so it's not yet impulsive (required to confirm a turn), but my instinct is that it will become impulsive in fairly short order.  Friday's low appears to be the dividing line between a corrective decline that would probably need to have ended already and at least a near-term turn that would require another wave lower. 

Again, my gut puts me in favor of the latter, but the charts haven't declared that from a technical perspective yet.

In conclusion, if bulls can hold Friday's low, then they could rally up to new highs from here.  I'm inclined to think that they won't, and that we'll probably at least test the zone near black "Bull: c" before it's all said and done.  A rally to fill the gap (near 2850) today wouldn't surprise me, but I'd be inclined to bet against that rally (with a fairly tight stop, of course) if it occurs.  Bears need another small wave down to turn the decline from 2863 into an impulse, and there are, of course, no guarantees that they'll get it.  Trade safe.

Friday, August 10, 2018

SPX Update

Last update warned that it was a good idea not to put the cart before the horse, and that we shouldn't get too bullish yet, because the zone near the all-time high could act as resistance.  That zone has indeed acted as resistance so far -- after stalling there and making a couple failed runs higher, it appears SPX will open today with a gap down.

One would think that SPX will probably want to at least test the mid-2820's from here.  Interestingly, because of the potential expanded flat I spoke about on Monday, in the event that SPX heads all the way south of 2800, bears are going to need to be near-term cautious at that time, as shown on the chart below:

In conclusion, the all-time high is acting as resistance so far, which is what bears needed to see at this stage in the game.  We'll track this in real time and see how it develops.  Trade safe.

Wednesday, August 8, 2018

SPX Update: Carts and Horses

Last update, we looked at the potential expanded flat pattern in SPX, and despite being roughly a 75% favorite, that pattern has thus far failed to materialize.  It's not entirely off the table yet, but if it materializes now, there's some danger for bears that the top might be a b-wave.  We'll burn that bridge if we come to it.

SPX is now retesting the zone near the all-time-high, and this is a possibility we've talked about previously, even for the bear case.  On July 25, I wrote:

The market can certainly run a bit higher if it wants, and I've seen many extended fifth retraces nearly-perfectly tag the prior high before reversing.  In this case, that would be the all-time high, if the market chooses to go that route.

Of course, whether the ATH will act as resistance or not is yet unknown.

In conclusion, we're getting into "do or die" territory for bears, but we're not going to put the cart before the horse yet... we'll just have to see how the market reacts here.  Trade safe.

Monday, August 6, 2018

SPX Update: Understanding Expanded Flats

One of the most common Elliott Wave patterns since about 2009 or so has been the "expanded flat."  I'm not sure if this is the result of the rise in popularity of algorithmic trading or what, but since roughly 2009, this pattern has become incredibly frequent at both short and longer time frames  Below is an illustration of the expectations of this pattern:

When we look at the current 5-minute chart of SPX, we can see that it certainly appears to be a textbook expanded flat:

Accordingly, I have no choice but to "trade what I see" and continue to favor the result that the current bounce that began at 2796 will reverse fairly directly:

In conclusion, due to the fact that the pattern appears to be a classic expanded flat, I have to give the odds to the result that SPX is still due for a trip south of 2796.  Of course, in the market, just as in life, nothing is 100% guaranteed.  In my experience, this pattern is reliable at least 75% of the time, but that likewise means that it's guaranteed to fail roughly 1 in 4 times, so it's always possible that "this is that time."  But the bottom line is, playing for the 25% is a long-term loser, so we simply have to favor the higher odds unless/until proven otherwise.  Trade safe.