Wednesday, July 18, 2012

SPX and NDX Update: Market Set Up for a Good-Sized Move

Yesterday's outlook came within 1.68 points of being "perfect," but missed the morning target by, well, 1.68 points.  The remainder of the day couldn't have played out any better, though.  A picture is worth a thousand words, as they say, so below is just a quick look at yesterday's projected market path.  In reality, the market rallied up to 1361.32 (1.68 short of my first target), then reversed back down to support at 1345 (as suggested), then rallied right back up to resistance at 1365.  Certainly a number of traders on both sides of the trade got burned by the double-whipsaw, but they could have saved themselves a lot of anguish (and probably money) ahead of time by simply studying the chart I published yesterday (yesterday's chart below):

(For new readers, do keep in mind that my projections are never intended to be time-accurate -- I only project price, and then I simply work within the available space to try and keep things legible.)

Certainly every day doesn't play out as perfectly as this, but over the past couple weeks, many of the short-term projections have played out this well.

So where are we now?

Well, the market has provided what is, in my view, a glimpse into the potential for a solid directional move.  It has set up a bullish and bearish trigger point, and whoever claims their key levels first should gain a decent victory. 

The bulls, quite simply, need to break out solidly from the 1367ish resistance zone.  If they can do that, there are good odds of a run into the 1390s or even the 1400s.

The bears need to reclaim 1345.  If they can do that, then that would break the up-facing wave which launched during yesterday's session, and the market should be cleared for a run down to at least 1320.

Using the Nasdaq 100 (NDX), I'd also like to share why it appears that the move up is either the start of something larger and bullish, or the end of it.  The key level bulls need to hold on NDX is 2554.

The SPX 15 minute chart highlights some bullish and bearish trade triggers.  If the bull count is unfolding, a retrace to roughly the S1 area would be reasonable.  If the bear count is unfolding, the top is probably in (or very close).

The SPX big picture view (below) currently highlights the bullish short-term targets -- contingent of course on the bulls breaking out here.

Yesterday, I talked about the potential of a triangle forming in the Dow Jones Industrials.  Until the bulls overtake the SPX 1374 high, this triangle remains possible.  In a triangle, each wave is usually formed by an a-b-c correction.  A very common relationship in Elliott Wave is the relationship where wave c is equal in length to wave a.  So, with that knowledge, look what happens on the SPX chart (below) if we extrapolate that common relationship... we end up with a perfect symmetrical triangle. 

Nobody likes ambiguity, least of all me (it always means I have to draw extra charts), but unfortunately, the market is often a place of great ambiguity.  It often pays to be aware of the potentials that aren't really black and white, and not get become limited by only thinking "inside the box."

In conclusion, the bulls appear to have the upper hand, but aren't quite in the clear yet.  The market is sitting just under key resistance, and bulls need to make a clean breakout to keep their short-term hopes alive.  If the bears are going to make a stand and turn things back down, this is where they'll do it.  The good news is that what happens over the next few sessions should clearly point the way for the market's next decent move.  Trade safe.


  1. Nice work as always J. I sort of feel we need a decent plunge to compel the QE that has the market where it is in the 1st place but we shall see

  2. Your charts are impossible to view on an iPhone, so I have no idea what you're talking about. Why don't you release the freeze you put on the charts??