Monday, December 22, 2014

SPX, NYA, RUT: No Material Change Means It's Time to Play Devil's Advocate

No material change since Friday's update (please refer to it if you missed it), but I do think it's a good time for bulls to stay on their toes.  As I see it, there are two major inflection points wherein bears might surprise everyone and seize control, and the first such inflection point is essentially upon us (the second one comes shortly after new all-time highs).  It is a little bothersome that sentiment seems to be outrageously bullish, and that pretty much everyone is treating new all-time-highs as a given.

To be fair, I do still expect new highs in SPX, and so far that market's come within 2 points of breaking the old ATH.  But I always like to play devil's advocate to myself in the interest of staying as objective as possible.  So, from a technical standpoint, we do need to stay aware of the current inflection point, which is probably best revealed via NYA:

No change to the big picture:

SPX has several near-term options, and it's impossible to sort one from the other at this stage.  Meanwhile, perhaps the more meaningful takeaway from this chart is that SPX appears close to completing five waves of rally.  If my intermediate thesis is correct, this is the fifth wave rally of a larger fifth wave rally of a still larger fifth wave rally -- and a deeper correction will follow.

While there's no room for complacency this close to a major swing high, unless the picture suddenly changes significantly, RUT is probably going to keep me in the near-term bull camp until it breaks 1213.55:

In conclusion, we may be close to unraveling a fourth wave correction, but ultimately I'd still like to see SPX and RUT make new all-time highs before embarking on a deeper correction.  Trade safe.

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