Wednesday, December 4, 2013

SPX and INDU Updates: Dow Triggers a Warning Signal

"There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market." - Paul Tudor Jones

In Monday's update, I noted that November's 1809-1816 target had been captured, and warned that a larger correction appeared likely.  Later that same day, the S&P 500 (SPX) even presented longs with a second opportunity to exit within the target zone before dropping below 1800.  The market has continued to follow the expectations of last month's preferred wave count, and today I have some added signals and potential targets.  I'll let the chart annotations do most of the talking today, so we'll start with the SPX 3-minute chart and build from there:

Now that there's more info to draw from than there was during the weekend (Monday's update), I can provide a bit more perspective on the SPX 30-minute chart.  Note the potential head and shoulders top under construction.  The alternate count has to be considered for the moment, since this is not yet a clearly-impulsive decline -- a new low would give it a much more impulsive appearance.

The Dow Jones Industrial Average (INDU) notes an interesting warning pattern that has formed in RSI and MACD:

In conclusion, if this decline is indeed part of the anticipated higher degree fourth wave correction, then it should be at least two legs in depth.  A new low from the current leg would go a long way toward confirming that outlook.  Trade safe.

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