Wednesday, March 25, 2015

SPX and INDU: Rally, Retrace, Rinse, Repeat

We have an interesting situation with the recent rally off the low, and it remains unlike any decent bottom this market has seen since 2009.  As we can see on the INDU chart below, there have been a total of (4) one-day wonder rallies, and three of those were almost entirely retraced over the next 1-2 sessions.  The only move that has stuck (so far) is the Fed rally of the 18th.  Take that off the chart, and INDU would be flat for the past couple weeks.

For the time being, I'm going to continue publishing both the bear and bull counts, since the decline is (so far) only three waves.  First is the bear count:

Next is the bull count.  Wave 4 has enough waves in place to bottom at any time, if this is simply a corrective decline:

No change to the bigger picture:

SPX has reached the vicinity of its downside inflection point.  If the decline is a correction to an ongoing bull wave, then it may be complete or nearly complete (and even for a bear wave, there is at least potential for a complete first leg):

In conclusion, the rally since mid-March has been underwhelming in comparison to most of the bull waves we've seen in this market.  As of yet, though we still do not have a larger impulsive decline from a high, so stating that "the top is in" with any conviction would still be premature.  I remain very slightly more inclined to favor the bear counts, but certainly not in any sort of stubborn way -- it's simply what seems to fit the overall picture a bit better for now.  Trade safe.

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