Wednesday, June 29, 2016

SPX and NDX: Why the Decline Probably Isn't Over Yet

Going back several weeks in the updates, I've been mentioning the zone around SPX 2000+/- as an inflection point, and the "zone to beat" for bears.  On Monday, SPX dropped down into that zone, and bulls found support waiting there.  The question bulls and bears both have now is:  "Is the decline over?"  Today I'll attempt to answer that question.

Okay, well, I thought about trying to build suspense here, like they do on TV ("When we come back, the answer to 'Is the decline over?'"), but that would require running a few commercials and you don't have that kind of time, so let's get right to it.  The answer is:  "Probably not."

For evidence, I submit Exhibit A:  NDX.  The basic issue discussed on the chart also applies to several other charts as well.

Exhibit B is even simpler, and is shown via the SPX chart.  Keep in mind that SPX has the same options for a complex bullish (then bearish) expanded flat as NDX, using equivalent highs/lows -- but I consider the expanded flat an underdog:

In conclusion, although bulls are staging a convincing rally off the first SPX support zone, the current available evidence suggests that this bounce is probably a simple countertrend rally.  As noted, next resistance is near 2050 SPX and the red trend line, so we'll see how the market reacts there and watch for impulsive turns.  The expanded flat shown on NDX is technically possible, but probably a slight underdog at the moment -- nevertheless, bears probably don't want to be shorting willy-nilly (symbol: WLNL) into this rally, but should choose their entries carefully and respect their stops.  Trade safe.

Monday, June 27, 2016

SPX and RUT: Equal Time

Last update, we talked about all things bearish, so in this update, we're going to at least take a look at some options for the bulls.

Probably the main thing bothering me about the recent top is that it came on bad news.  Strange as this may sound, I generally don't like "bad news tops."  Bad news tops spark panic selling, and that can lead to "seller's remorse" shortly down the road, when everyone realizes that the world didn't end immediately.   As the old expression says:  "They don't ring a bell at the top."

Don't get me wrong:  I'm still going to proceed under the assumption that this is "bearish until proven otherwise" -- again, I'm just trying to bring some balance to the outlook.  Forewarned is forearmed, as they say.

For one look at a couple potential bull inflection points, here's RUT:

Below is a simple support and resistance chart for SPX, with the note that RSI has not yet confirmed this new price low.  Bears would like to see that happen sooner rather than later:

Finally, one of Friday's charts updated with only the new price action.  Note that bears broke and back-tested the first support zone:

In conclusion, beyond attempting to bring a little balance to the discussion (as I did above), there's nothing much to add to Friday's update.  Trade safe.

Friday, June 24, 2016

SPX Update: Millions of "Leave" Voters Charged with Insider Trading

Yesterday, Britain voted to exit the European Onion (EO), and today the world breathes a sigh of relief.  Or at least those of us who inherently distrust large central banks do.

Some have called this exit vote a "black swan event," as if there was no way anyone could possibly have seen this coming.  Certainly no one could have foreseen the possibility of a rally to retest the all time highs, followed by a sharp decline.  And they most certainly could NOT have anticipated that possibility all the way back in February near the low, could they?  Because, if they did foresee this possibility, well, that would throw a huge wrench in the whole "black swan" theory.  It would actually suggest that the charts LEAD the news.  If you can imagine.

No, surely no one could have foreseen this "unexpected" catastrophe from that far away.  Here's a chart from February that decisively proves nobody could have predicted a retest of the all-time-high, followed by a "black swan" event that crashes the market.

Err, wait a second... what's that black "Bull: C" path doing on there???

Hmm... Maybe the charts DO lead the news, and not vice-versa as the news organizations would like you to believe.  Because, after all, if everyone accepted the premise that the charts lead the news, then what exactly would traders and investors even need the news for..?

Moving on to today's charts, the recent near-term pattern does leave some unanswered questions -- for example, ES (the e-mini S&P futures) actually broke the early June high, which confirmed that the expanded flat pattern I was worried about on Friday was entirely correct.  However, it appears cash isn't going to get the opportunity to break its equivalent high at 2120.  This creates some questions for the wave counts, but rest assured that I'll be trying to answer those question as soon as possible.  In the meantime, I'm going to assume the most straightforward version of the decline, because I really have no choice BUT to assume that, at least until the market shows some sign of bottoming.

The chart below discusses one potential "bull" option which answers some of the questions posed above.  However, even that option likely doesn't find support until the 1900- zone:

It's also time to update the TRAN chart, because I believe this chart may offer some additional clues to the near-term, and to the bigger picture.  Long-time readers will recall that I turned bearish on TRAN within a few points of the top, and this market still appears intermediate bearish:

The SPX 2-hour chart is below:

I'd also like to share something I published in our forum last night, around the time that ES [the e-mini S&P futures] was limit down, because it "bears" repeating:

At the current rate of decline, ES would be at 0 in roughly 20 days. Obviously, that ain't happening... but it's human nature to get carried away by the moment and project the last few hours or days in a linear fashion.  So, point being: Don't let yourself be the guy who gets upset when the market bounces. Be careful when you catch yourself thinking: "Why is it rallying? What changed?" What changed is: nothing. The market is NOT going to zero, THAT'S why it's rallying (in our hypothetical future).  And, even if it was going to zero, it's not going in a straight line.

In conclusion, as I've discussed over the past week, the pending breakdown at 2050 can only be viewed as bearish -- assuming, of course, that cash follows ES' lead and breaks 2050.  For now, despite some ambiguity near the high, we're just going to presume the most bearish straightforward count and try to adjust in real-time if it becomes necessary.  I should note that all of this is predicated on bears sustaining a breakdown at 2050; if 2050 doesn't break, then bears have no confirmation of anything and the expanded flat discussed Friday, Monday, and Wednesday would remain on the table.   Trade safe.

Wednesday, June 22, 2016

Potential SPX Patterns Remain Diametrically Opposed

The moment the market's been waiting for -- the Brexit vote -- is almost upon us.  Voting closes at 5 pm Eastern time tomorrow, and there will be no exit polling done, so the results will come trickling in as each station counts up its votes.  My exclusive sources have revealed that a special American vote-counting team (from Broward County) is flying to England this morning, and will be on hand to drag things out and frustrate everyone -- IF that becomes necessary.

The charts seem to fit the tension surrounding the upcoming vote, and the bull and bear counts appear to be diametrically opposed in a significant fashion. 

Another short term SPX chart below:

In conclusion, there's no change from the prior two updates, as the world awaits England's vote.  Trade safe.

Monday, June 20, 2016

SPX and INDU: A Bit More Detail

Last update was 90% caveats and 10% update.  Bears managed to turn the market down almost immediately on Friday, which confirmed that the micro-count I posted for NYA (of a completed five-wave rally) was correct, but the idea that it could be wave c of an expanded flat was a bust.  Today it appears that complete five wave rally was definitely not a c-wave -- it was either wave-a or wave 1.

I remain a bit head-tripped over the fact that SPX found support right at the 2054 inflection point from June 10.  I'm head-tripped because that was the inflection point for the most bullish count I could find on June 10.  I don't think many other technicians are as worried about it -- probably because they didn't/don't even see the expanded flat count I was worried about (I posted that count publicly on Friday, so they probably "see" it now.). 

The linear thinking here says "we had an impulsive decline, therefore we're due for an ABC rally and another impulsive decline."  That's the most obvious read, therefore that's the read most Elliotticians will probably be tracking.  I hope, for bears, that it really is THAT simple.  But the one time that an impulsive decline can mark the end of a move instead of the beginning of a move is when that impulse is an expanded flat c-wave (bulls, of course, will be rooting for this outcome).

Frankly, I wouldn't be as worried about it if the market hadn't bottomed where it did.  What I didn't discuss back on June 10 was that the second target/inflection point (2054 +/-) I had calculated was potentially the most bullish of the three, because it was where the market would bottom for a second or b-wave retrace.  Now, to give some small encouragement to bears:  One thing I've learned over the years is that if you read the waves right, you can often find the inflection points for possible counts and the market will honor those inflection points whether that count is "the" count or not.  It's almost as if the market knows what to do to create maximum ambiguity, so it bottoms or tops at an inflection point even if it intends to break that inflection point later.  Maybe that's what will happen here. 

But to wrap that point up: all of the above is why I'm head-tripped right now.  And that's why I'm being more cautious than I might otherwise be.

So, with that out of the way, here are the current options:

The options are essentially the same for SPX:

Note I've included the "true bull" target of 2175-80 on the chart above -- that's in the event that 2150 marks the bottom of the c-wave of an expanded flat 2nd wave.  Do note that SPX can break 2120 and bears do still have some options until 2132 is claimed.

In conclusion, it's entirely possible I'm over-complicating this wave, simply because I'm seeing a possibility that most people probably aren't seeing.  Sometimes seeing the "non-obvious" counts actually puts you at a disadvantage if the market is intending to behave in a straightforward fashion.  There aren't any other clear "tells" right now that allow us to eliminate that more complex count -- but way back at the lows, I did feel the rally was probably a larger B-wave, so for now, that's what I'm going to continue defaulting to until the market proves otherwise.  I'm just not crazy about the near-term pattern now, so take that for what it's worth.  Bears need to break 2050 to make things "straightforward" again.  Trade safe.

Friday, June 17, 2016

SPX, INDU, NYA: Monster Inflection Point

Last update, I wrote:

A back test of the 2085-90 zone would not be unreasonable, but presently I expect the market will then be sold to new lows.

I'm inclined to think SPX will AT LEAST test the 2054 +/- target/inflection zone (noted back on June 10)...

SPX hit 2085.65, then turned and dropped like a rock to new lows.  It went on to capture the 2054 target, which was also mentioned as an inflection zone -- and inflect it did, launching SPX all the way back up to almost 2080.  That's a pretty solid double-round-trip call.  Now things get a little more tricky.

I'm going to try to keep things as simple as possible today, given how complex things truly are.

Let's start with INDU for a detailed explanation as to why:

I didn't detail the SPX chart, but the potential counts are essentially the same. 

For our last chart, let's look at NYA, simply because I detailed the chart, and it does suggest that the zone around yesterday's high is an inflection point.  It's entirely possible bears could turn it right back down from here.

In conclusion, yesterday's low appears to represent a monster inflection point, and could be the dividing line between "very bullish" and "very bearish."  So, what am I favoring?  Well, this is a very difficult call, so I want readers to understand that this is not a "high confidence call" (Wednesday, when I wrote:  "I expect the market will then be sold to new lows." is an example of a strongly-worded high confidence call.) -- but I'm leaning slightly toward the bears here.  This is NOT "mortgage the house and go fully leveraged short with no stops!" territory by any means.  The bull count is wholly viable, and the market bounced RIGHT off the inflection point.  That has to be respected.

But I'm slightly inclined to think the bears will turn it around.  Be aware that if they can't do that fairly directly, then it's entirely possible they won't do it until we retest the zone around 2120.  And if they can't turn it back down today, then it's possible they won't do it at all.  Protect yourself accordingly.

Said more simply:  Yesterday's high could be treated as a pivot zone, and a zone to act against.  But if we clear that zone, then things get ambiguous, and possibly dangerous for bears.  Vice-versa for bulls, with SPX 2050 -- that zone is also likely to function well as a pivot.  Trade safe.

Wednesday, June 15, 2016

SPX and NYA: Failing Support Not Terribly Encouraging for Bulls, Will the Fed Bail Them Out?

Despite what those of you who own Gregorian calendars have been led to believe, today is yet another Fed Friday.  This means the Fed gets to waltz out and make blatantly obvious statements that pundits can then quote with great excitement and fanfare -- as if the Federal Reserve somehow knows more about things than common dummies like you and me.  For example, Janet Yellen said that the pending British referendum on whether to leave the European Onion (EO) "could have significant economic repercussions," which is like saying that the surface of the sun "could be a place that would benefit from air conditioning."

The implications of Brexit are so incredibly obvious that even feral cats understand them -- but pundits love to run wild when Yellen says something like this, presumably because it means that even she gets it.  Besides, feral cats are a wholly disenfranchised segment of the population, so it doesn't really matter WHAT they understand about Brexit, since their oppressed voices are only heard late at night when everyone but me is trying to sleep.  And what I usually say to them is: "SHUT UP YOU FERAL CATS!"  So I readily admit to being "part of the problem" when it comes to their disenfranchisement.

Anyway, I'm not entirely sure how I ended up on that tangent, although I suspect that the feral cats currently howling near my back patio may have been a contributing factor. (I'm pretty sure that Maui's feral cat population is higher than its human population!)

Getting back to the market... er... getting TO the market, since we were never on that topic to "get back to," at least not today, there is currently nothing terribly bullish about the charts.  Let's start with NYA:

Next, let's look at three different charts of SPX and see if there's anything particularly bullish in them.  First is the preferred wave count from June 8, which still sees SPX testing 2000-2020 before the next real decision point occurs:

Next is the near-term SPX chart:

Finally, the big picture trend channel chart:

In conclusion, there's just nothing particularly bullish about support failing across multiple time frames.  Can bulls suddenly put something together and reverse the whole thing?  Of course, the market can change in a heartbeat.  But as of right now, there's no reason to think that will happen -- so unless bulls start putting together something more convincing (or the Fed comes out and announces something ridiculously bullish), I'm inclined to think SPX will AT LEAST test the 2054 +/- target/inflection zone (noted back on June 10), and probably test the 2000-2020 zone.  Trade safe.