SPX, INDU, COMPQ, GOLD: Don't Hatch Your Chickens Before They're Counted

First up: the forums are back up.  Note that if you have trouble there, then you may need to clear your browser cache.

So the main thing that's happened since last update is: "nothing."  The market is still in basically the same place.  But that's not insignificant here.  Because it means the downward momentum has stalled for the time being -- after reaching targets in some markets and nearly reaching targets in others.  As long-time readers know, the areas near target zones represent inflection zones.  

SPX illustrates the next steps for bulls... and a test of upper red looks slightly better than 50% likely at this moment.  Then if bulls can breakout there, it could be back to the black lines... and maybe back up to new highs.  So bears probably shouldn't count their chickens just yet.

COMPQ is still below its first key support, but hasn't declared which way it wants to go yet and could still whipsaw:

INDU is in a similar boat to SPX, with the added benefit of having had futures capture its target:

Finally, Gold just did an interesting test of a trend line that's been on this chart for a while -- and so far, that held as support.

In conclusion, Monday's update's conclusion still hold:

The question at the moment is whether Trump's tweet is going to be enough to stick save this thing here -- and "here" happens to be at or near first targets, so that's not out of the question.  The first positive sign for bulls would be sustained trade north of ~6700, and ideally a breakout over the upper red boundary on the SPX chart.  The "positive" sign for bears would be SPX giving back everything futures just gained and COMPQ sustaining trade south of Friday's low.  The COMPQ chart suggests that if that occurs, we could see the selling continue, possibly leading the market another 5-10% lower, if not more.

Trade safe.

SPX, COMPQ, INDU: Stick Save or Bust

First up, the forums are STILL down -- after much back and forth and gnashing of teeth, it appears the problem is on my host's end, so now we're waiting for them to sort out their server Apache handlers.  In the meantime, I'll post to X a bit: Pretzel Logic

Market-wise, last update said: 

The thing about this wave is *if* it's a C-wave decline, it should be a clean motive wave -- either a standard impulse down or a diagonal.  Right now, it isn't clearly either of those things.  That may suggest it's still incomplete.

And SPX then made new lows -- so it was, indeed, incomplete.

But the market is having an interesting moment now: after drifting downward early, Trump tweeted that he was in positive negotiations with Iran and futures shot up ~230 points in six minutes. Whether that's enough to mark a bottom or not is anyone's guess.  COMPQ suggests bulls probably need it to be.  If futures give all those gains right back, beware.  COMPQ's prior behavior around this trend line suggests bulls can't tolerate being below it for long without more selling hitting the tape.

SPX futures took it closer to its textbook target in the overnight, but didn't quite reach it.

INDU futures basically did reach its target in the overnight.

In conclusion, the question at the moment is whether Trump's tweet is going to be enough to stick save this thing here -- and "here" happens to be at or near first targets, so that's not out of the question.  The first positive sign for bulls would be sustained trade north of ~6700, and ideally a breakout over the upper red boundary on the SPX chart.  The "positive" sign for bears would be SPX giving back everything futures just gained and COMPQ sustaining trade south of Friday's low.  The COMPQ chart suggests that if that occurs, we could see the selling continue, possibly leading the market another 5-10% lower, if not more.  Trade safe.

OIL, SPX, COMPQ, INDU: What Are We Even Looking At Here

Okay, let's lead with a new chart today:

The thing about this wave is *if* it's a C-wave decline, it should be a clean motive wave -- either a standard impulse down or a diagonal.  Right now, it isn't clearly either of those things.  That may suggest it's still incomplete.

Bigger picture, SPX remains above long-term support.  As always, some whipping around that level is okay (that's just what markets do) -- it's a sustained breakdown that bulls should worry about:

INDU has gotten close to its downside target:

Bigger picture, there are enough waves for a complete Supercycle 5 if it wants:

COMPQ is still above its long-term support zone:

And finally, a number of readers have asked for an update on the legacy oil chart (the same chart since 2011, which has caught every major move in oil for the past 15 years).  At this point, basically the hope for oil BEARS is that the wave labeled "2?" is actually a b-wave low (which would need to be revisited).  If it's not a b-wave low, then we may have just begun Primary Wave 3 up, which will be a long and scary wave that takes oil into the stratosphere (~249 target).  That might pair well with the end up Supercycle 5 in equities... hard to imagine the economy booming with oil above $200 a barrel.  

Worth keeping in mind.

In conclusion, equities are holding their long-term support zones for now, but I do again want to stress that -- IF this is a bear wave -- it's the type of wave that moves "gradually, then all at once."  So -- again, IF this is the start of a bear wave -- then at some point it will just let go, and there won't be many good exits in the future.  Because of the overlapping nature of the wave so far and the unclean high, I don't think there's an easy answer to that question right at this moment.  

Trade safe.

p.s.- the forums are currently down.  IT is working on this and they will hopefully be back up this weekend.

SPX and COMPQ Updates

Last update attempted the bold gambit of publishing an extremely bearish chart to attempt to force bulls to rally (don't ask too many questions about the mechanics behind this, but it has something to do with quantum physics), and the market did indeed stage a small bounce in the two days since.  However, bulls haven't cleared any meaningful levels so far.

As a reminder, the first thing bulls need to do is sustain a breakout over the red channel.

Meanwhile, the next things bears need to do is sustain a breakdown at support.

Same goes for COMPQ:

COMPQ's near-term chart is still in roughly the same place it was, but this offers another way to view support (and it roughly aligns with the chart above):

In conclusion, not much actual movement since last update, and I remain skeptical of this overall pattern.  The next step for bears would be to sustain a breakdown at SPX's most recent low.  If they can do that, then maybe things finally get moving.  Conversely, if bulls can sustain a breakout over the red trend channel in SPX, then the high 6800s comes on the radar.  Trade safe.

SPX, INDU, COMPQ: Bear Chart to Force Rally?

Since last update, SPX dipped a quick toe below last week's low (though ES held above the comparable low).

Let's look at a long-term chart we haven't looked at in a while:

Near-term, SPX is still testing the edge:

COMPQ remains above long-term support:

INDU remains below its first support zone, but above its second:

Finally, it might be time to force bulls into a rally -- by bringing out this old, very bearish chart.  In the event this IS a diagonal, when the diagonal completes, a trip back below Dow 20K would be the normal result (not all in the same day, obviously -- but probably over a couple years):

In conclusion, not much else to add here -- the market remains above most of its key levels, at least for now.  The inclusion of the most bearish chart in my chartbook might force the market to rally today (I'm joking... sort of).  Trade safe.

SPX, COMPQ, INDU: And a New Chart

Since last update, SPX stalled at channel resistance and has ground its way lower.  Let's get right to the charts; there's a new one to cover.

First up, COMPQ is still holding up, above support:

Here's the new chart, which discusses both the bull and bear cases:

INDU was rejected on its first test of resistance.  Because it's now back to support (the old low), it does have a window where it could decide to bounce again if it wants:

Finally, SPX.  I've added an "extended C" target because the possible bear nest has to be taken seriously for now, and if this is a bear nest, the standard C target may not allow enough space for it to unwind:

That's all the news that's fit to print.  Trade safe.

SPX, INDU, COMPQ: Plus the Biggest Risk in AI That No One is Talking About

Before we get into the charts, I want to talk about a new study, because it has implications for the broader market.

The study I'm referencing tested 35 AI models across 172 billion tokens of document information (in other words: the testing was robust).  Here's what the study found:

Even giving the AI the document and then asking about the document it was holding (i.e. -- not asking the AI to go from memory but to go from the data right in front of its virtual face), the very best AI model in the study fabricated answers 1.19% of the time.  That's under optimal conditions, not under a stressful real-world application.

Most top models fabricated at rates of 5% to 7%.  With the answers in hand.  The human equivalent would be looking at a page and still making up what it said.

The median fabrication rate across all 35 models tested was ~25%.

As I posted on X:  I think this problem isn't talked about enough. Because 100% of the "AI will save/destroy the world" expectations hinge on the ASSUMPTION that this problem will be solved at some point.

What if it just... never gets solved? What if it's fundamental to the way we've designed AI? What if our design guarantees this problem manifests and we can't solve it without losing all the progress we've made?  (The way, say, car designs guarantee that cars will roll and you can't solve "car rolls downhill when brakes are disengaged" without starting over from scratch.)

Jason Haver on X (this also contains the link to the study)

Because (as I posed in a follow up): Imagine a company where the CEO hallucinates data, sales figures, suppliers, manufacturing capacity, etc., at even a rate of 5% per day. That company is bankrupt before it even gets off the ground. ALL "AI will run everything" scenarios assume this gets solved favorably.

Or imagine a doctor who hallucinates illnesses you don't have and cures that don't exist.

In other words, the entire AI dream is built on the belief that this foundational problem will get solved.  If this problem does not get solved, then we're currently in a massive hubristic AI bubble.

I'm not saying it won't eventually get fixed -- I don't know whether it will or not.  I'm just saying: we have to consider the possibility that it doesn't.  In which case, AI may be a decent research partner (assuming you verify everything it tells you), and it may aid in general human progress the way, say, supercomputers did -- but it will never be able to run anything important on its own.

Food for thought.

Market-wise, last update concluded:

This is probably the last chance for bulls to pull a whipsaw.

And they did.  But, in INDU at least, they have not yet broken back above key resistance.  Let's look at SPX first:

INDU is below resistance and has so far only back-tested it:

COMPQ, on the other hand, is still above support (!):

In conclusion, at this exact moment, we have a mixed bag of signals.  SPX is in no-man's land; INDU is below resistance; COMPQ is above support.  This is an absolutely schizoid market, but what we can reasonably infer from this is that bulls are probably out of chances and likely need to keep this bounce going.  If they can't, then bears (probably) finally get the ball.  Trade safe.