Friday, November 14, 2014

SPX, BKX, NYMO: Market Continues Unusual Behavior

How strong has this rally been?  Weirdly-strong, that's how strong.  Take a look at the McClellan Oscillator (NYMO).  Current behavior does not match the behavior over the prior 3 years of bull market:

But, at least we can't be terribly surprised, as we identified the unusual nature of this rally relatively early, and its strength was written on the charts weeks ago.  Back on October 29, I wrote:

...this rally has already clearly shown it's not a "typical" rally; therefore, we would be foolish to ignore that and attempt to treat it as we would a typical wave... this rally has shown us that most anything's possible.  

And on October 31: I noted previously, this move has not behaved in the usual fashion, which means this is not the type of wave where you can make reversal calls with high probability

Technical analysis is based on the idea that the market will perform in a similar fashion to the way it's performed in the past -- but when you encounter extraordinary moves, they perform almost according to their own rules, and thus do not lend themselves terribly well to anticipation.  Recognizing and acknowledging that, as I covered in Wednesday's update, has value in its own right. 

To which I'll add:  Treating an extraordinary market like it's an ordinary market would be akin to encountering a dog that's the size of a house, then arbitrarily assuming that humongous dog will behave just like any other dog, and trying to engage it in a game of fetch.  Maybe it will play fetch... or maybe it will just eat you.  There's really no way to know in advance -- but, personally, I'd rather not feed my capital to the dogs on moves that have already warned in advance that the usual high-probability-type plays are not likely to work.  There are plenty of times throughout any given year that the market behaves in a perfectly reasonable fashion, all it takes is the patience to wait for them. 

Anyway, in the last update I published a preferred count target for INDU of 17535-50, and INDU bottomed at 17536.17, then went on to make new highs.  For SPX, I published the target of 2029-31, and SPX found support at 2031.95.  I speculated that there was a chance wave (2) might begin, but the support at the c-wave targets prevented that option from going beyond the speculative stage.

I'm somewhat conflicted over the charts at the moment, partially because yesterday SPX did reach my next published upside target zone (the rising red trend line), and encountered at least some resistance there.  Please note the annotation in blue near the middle-right side of the chart.  As I've been stating since October, I really don't want readers to get too focused on the wave labels, because this entire wave remains borderline "uncountable."

When I become conflicted on one market, I look at others.  And while doing so, BKX was one chart that jumped out at me last night:

SPX's near-term chart doesn't necessarily agree with BKX, though.  As noted, the bear count shown in gray should probably be viewed as the underdog, given the prior trend.

In conclusion, 2030 appears to be the first important level for bulls to hold.  To the upside, the rising red trend line remains the first important resistance zone.  Trade safe.

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