Friday, January 30, 2015

SPX and INDU: Two Challenging Calls, but the Context Remains Bearish

I'm going to keep today's update as simple as I possibly can, given the complex options.

There are two questions begged of the charts, and both are quite challenging to answer right now.  Keep in mind that SPX is now on its ninth trip through the exact same price territory that it has been covering since November, and each trip through a zone weakens support and resistance inside that zone -- thus, making predictions while a market is still within a noise zone becomes increasingly difficult.

That said, let's tackle the challenge as best we can.

The near-term question is: is this leg of the decline complete?  I'm very slightly favoring the idea that it is not yet complete, meaning new lows are lurking on the near-term horizon -- at least for SPX, if not INDU.  Due to the fact that the decline may have included one or more extended fifth waves, this is a challenging call.

The bigger question:  Has wave (3) down begun, or is the recent decline from 2064 SPX still part of an ongoing correction?  I'm slightly favoring the idea that it is part of an ongoing corrective wave, and will launch back up to retest 2064 yet again.  I'm favoring that because the last rally to 2064 appeared to be three waves, and ended abruptly without a fifth wave.  That suggests it was wave (b) of a more complex expanded flat, as shown below:

Here's what I think I know:  this market remains intermediate bearish; the only question is how we get there.  This chart remains materially unchanged since November 17, and the market still seems to be following the projections that were outlined more than two months ago.

Let's look at the first two questions in more detail, via INDU.  Daily:

5-minute chart:

One-minute chart:

In conclusion, SPX would look slightly better with a new low beneath 1989, INDU is a near-term toss-up regarding a new low.  In the meantime, if either market can sustain trade north of its down-trending channel, we may have to consider the idea that the lows could be in.

At the next larger wave degree:  Due to the fact that the rally to 2064 in SPX appeared to be 3-waves, when it "should" have been five-waves, I'm inclined to slightly favor the idea that 2064 will be tested yet again -- but this is again a very difficult call.  Presently, I believe that any rally would present yet another excellent shorting opportunity, if it were to occur.

In all cases, the preferred intermediate count presently remains bearish, regardless of the exact path we take to get there.  Trade safe.

1 comment:

  1. I really appreciate your pragmatic approach. Many other EWers seem to interpret based on personal biases. I noticed yesterday what seemed to be a H/S bottom on the SPX Mar futures (not spot) that may favor no further lows.