Monday, January 26, 2015

SPX and INDU Updates

Thus far, there's been no material change from the past few updates, though it's interesting that my "best guess" near-term path for the Dow Jones Industrial Average (INDU) played out exactly as projected.  The song remains the same, though I'd like to see bullishness increase a bit over the coming sessions.  Ideally, we should peak shy of the all-time high at a point when most bulls are feeling invincible.

If we instead break the all-time high, then, of course, we'll need to consider more bullish options -- however, due to the pattern off the low, the first alternate count would remain intermediate bearish.  But we'll burn that bridge if we come to it.

Let's start off with the big-picture SPX chart, which has continued to follow the road map that was first outlined back in mid-November:

Next is a more basic classic TA chart of SPX:

INDU followed Friday's proposed path for a fourth wave correction almost perfectly.  Ideally, we'd still like to see INDU break the red (b) wave high, but there are some inflection points that INDU will need to clear first (see chart notes). 

The SPX 1-minute chart below.  Presently, this is still presumed to be a fourth wave, but note INDU's inflection zone above -- SPX may face a similar challenge at the 2060 +/- zone.

Finally, I gave some thought this weekend to what the market could do to cause the greatest level of confusion at this juncture, and in the event Friday's decline continues directly, then we should give some consideration to the possibility that wave C is unfolding as an ending diagonal.  The upper and lower trend lines are purely speculative at this point, and they could deviate substantially from the way they're currently drawn.  I think of the market as a chess opponent, so I try to think two steps ahead -- but right now, this is just something to keep in mind.

In conclusion, the intermediate outlook remains unchanged, and new lows are still expected.   In the meantime, we have clues and levels to watch for the near-term, which should help us nail down exactly how we get there.

Keep in mind that, as noted on Friday, SPX already completed the minimum expectations for the pattern, so new highs beyond 2064 are not required.  However, due to INDU, the option that ALL OF 2/B is complete has to continue to be viewed as at least a slight underdog, and the diagonal would be first alternate.  Ultimately, though, we are awaiting a third wave decline, so it reserves the right to begin unexpectedly.   Trade safe.

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