Thursday, September 27, 2012

Intermediate Market Prospects Remain Open

So it's "that time" again, when the bears start getting loud -- how the market environment can change in a week!  The bottom line, though, is that nothing's cut-and-dried yet from an intermediate perspective. 

The market hasn't done anything to prove itself one way or the other here, and the long-term counts are simply going to require a bit more clarification from the market.  While many Elliotticians are viewing S&P 500 (SPX) 1426 as the "end-all" to ruin all future bull prospects, 1426 is simply the first warning level, and trade beneath that level would not guarantee a bearish long-term outcome.  The chart below shows why.

Something that remains bothersome to the immediate bear prospects is the fact that RSI and MACD both confirmed the 1474 high, and it's rare for the market to form a long-term peak without some type of divergence forming first -- not impossible of course, but unusual.

While we're at it, let's look at the count which has the bears claiming victory.  The pattern below is called an ending diagonal, and to my knowledge, I was the first to propose it, many months ago.  This pattern can't be confirmed yet, though the whipsaw of the upper trendline is a good start.  In any case, I'm continuing to track it, and am watching the market's behavior before putting all my eggs in one basket.

Over the short-term, the prospects for both counts remain viable.  The market has simply not declared its long-term intentions yet, and the first step for bears would be to complete a five-wave impulsive move to the downside.  In order for this to happen, it would take a low toward the (3)/c level, followed by a reasonable bounce and then another new low to begin to consider the decline impulsive, which would suggest a major trend change.

Some key short-term levels with larger-degree implications are noted on the chart below.

A chart of some simple trendlines and noted key levels.

The NYSE Composite (NYA) is now in the zone that will test the recent breakout.  Again, the market here has left its prospects open thus far.

The long-term Nasdaq Composite (COMPQ) remains one to watch.

TRAN, with bearish prospects in gray -- put this chart as one presently in the bears' favor.

Another chart that should leave bulls cautious is NDX.  NDX is one of the few markets where a clean five-wave rally can be viewed as complete, as I mentioned a few days ago.  Of course, there is no rule that says this five-wave rally can't be wave 1 of a much-larger five-wave rally, with a smaller 2nd wave decline unfolding now.  Again, this is one to watch going forward.

In conclusion, the bears still have work to do to break the uptrend and complete an impulsive decline.  As I've warned recently, this is a time for long-term caution -- as yet, though, the market has continued to keep its options open.  Trade safe.

Reprinted by Permission; Copyright 2012 Minyanville Media, Inc.

1 comment:

  1. Pretty nice work PretzelLogic

    DAX Short-term Update 28092012 DAX pushing lower this morning. Only 3 wave up last session.