Wednesday, October 1, 2014

SPX, INDU: Ignoring the Bulls

I have to admit, after the long chop zone we recently endured, it's been a while since I enjoyed charting this market.  But I enjoyed charting it last night.  I think the charts are pointing to some high-probability options right now.

Let's start with the SPX 3-minute chart, because I think this points to two reasonably clear near-term possibilities, and this will provide perspective on the charts which follow.

The 15-minute chart provides some additional perspective.  To me, Monday's break of 1965 says that the odds are very good that this decline isn't over.

Next is the SPX 30-minute chart.  For now, targets here are unchanged, due to the expanded flat possibility noted above.  If the market begins to confirm the nested third wave as currently labeled, then targets will need to be adjusted lower.


Let's take another look at the expanded flat potential for a continued chop zone, via INDU.  We can't yet ignore the possibility that the market will chop around further in this price zone, as it has on more than one occasion already.  The upside for bears in the event of continued chop would be that it would form a more solid topping pattern.  The downside would be "much patience required" in the meantime. Sustained trade below SPX 1967 would make an immediate decline more probable. (continued, next page)

Finally, a look at SPX's long-term monthly chart:

In conclusion, I feel the charts heavily favor new lows in the future.  We can't yet validate the most bearish potential of a nest of first and second waves, but that is the most straightforward wave count at present.  Barring a more complex correction similar to the one outlined on the 3-minute chart, bears may get their time in the sun in the near future.  And yes, there's still bull potential via an ending diagonal or similar -- but that option looks like a solid underdog as of this exact moment.  Trade safe.

1 comment:

  1. Excellent! Very nice, clear wave counts. Looks like with today's break below 1964, the nested 1's and 2's is turning out to be the case.

    Question: The blue 2 in paren's retraces almost all of the blue wave 1 in parens (more than 90 percent). I wouldn't have expected such a deep retracement in a nested 1,2 pattern. Have you seen this kind of deep retracement in other nested 1's and 2's?