Monday, September 29, 2014

SPX and INDU: 1965 SPX Critical Support

Friday's move has simplified the charts a bit, which is always nice.  By all appearances, 1965 SPX has become critical support.  1991 SPX is still first important resistance, though decidedly less informative of the market's intentions if broken; whereas a breakdown at 1965 would suggest a solid decline of at least 30-40 points, with good potential for 55-65 points (or more) before a decent bottom.

We're going to start with the SPX 30-minute chart, which looks rather straightforward.  Before Friday's open, I hypothesized the upper boundary of the black trend channel, which ended up being right where Friday's rally stalled.  The chart is pretty self-explanatory, which (thankfully!) eliminates the need for 400 charts today.  I did draw up a couple more charts anyway, but only because I like you.

If the bearish 1-2 nest is correct, it appears that red wave 2 likely completed on Friday, at the black trend line.  And if this is indeed the case, then a strong decline is on deck.

One count that's not shown above is the potential that the decline to 1965 actually marks ALL OF wave (1)/A down, as opposed to a bearish nest of first and second waves (or the ABC).  I strongly considered that possibility on Friday, and berated myself this weekend for not discussing it, since that count would have anticipated Friday's rally.  I'm still awaiting the arrival of "thought-to-chart" software, which will allow me to simply "think-in" the trend lines and wave counts as quickly as I see them, without having to label everything by hand, thus allowing me to publish charts much more quickly.  The good news is:  I finally ordered that software last night.  At least, I think I did.  Depends on whether my "thought-to-anything-you-can-imagine" software was properly installed.  (I don't think it was, because I never did receive that pink chimpanzee with the face of Gilbert Gottfried, which I ordered well over a month ago.)

Anyway, next is an update to INDU's long-term chart, with a downside target noted:

A close-up of INDU reveals that, so far, all the rally has done is back-test the most recent breakdown:
(continued, next page)

In conclusion, the 1965 zone of SPX now appears to be critical support.  The preferred count remains bearish and suspects that zone will indeed fail.  Unless and until some of the noted qualifiers are met to the upside, with the first semi-meaningful resistance zone being 1991 SPX, there's nothing in the charts to suggest bulls have much firepower at this moment.  Sustained trade above 1991 would not guarantee new highs or invalidate new lows, but it would at least be the first hurdle that could provide information.  So, barring an unexpected continuation of the rally, the preferred count downside targets are as noted.  Trade safe.

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