Friday, April 17, 2015

SPX and INDU: If Bears are Gonna Roar, then Now's the Time

If you're not a member of our private forum, then you're missing all the fun!  Just after the open on Wednesday, I alerted everyone to the fact that the rally appeared to be an extended fifth wave, and that it was likely nearing completion.  Then, shortly after the close on Wednesday, I published the following chart and suggested bears had the ball for the near-term:

I then published this updated version after the close yesterday -- and, based on where futures are now trading (they were slightly green when I first posted this chart), my preferred near-term target from Wednesday appears to be a done deal:

No change to the intermediate picture, and the next few sessions appear to be for all the marbles.  This is the best shot bears have had, and if they're going to make their counts happen, then now's the time.  Even in the event of the bull count, bears who followed the preferred count outlined on Wednesday should be able to exit for a small profit, and no worse than break-even:

Since we can never afford tunnel-vision in trading, let's take another detailed look at the bull option:

INDU shows some interesting patterns: (continued, next page)

Just like SPX, INDU is in the process of forming a whipsaw of its recent breakout:

In conclusion, the near-term preferred wave count that I outlined after the close on Wednesday appears primed to reach its first downside target.

What we'll be watching next is whether the decline forms an ABC, which would suggest the bullish triangle was in play, or whether it forms a five-wave impulsive decline, which would add confidence to the bear view.  Remain aware of the fact that we're still within a heavily-traded range, which means that it is entirely possible that support may be thin or non-existent until the lower edge of the range -- and both SPX and INDU have effectively whipsawed their most recent head-fake breakout attempts, which means that a lot of traders got caught wrong-footed, and that could add fuel to the fire.

In other words, don't get too far ahead of the market here, but wait for solid signals if covering shorts or attempting longs.  The bull counts are quite possible, but the bear counts remain preferred until the market more definitively says otherwise.  Stay nimble out there, and trade safe.


  1. 1st hour looks fairly impulsive and DJI has blown through a couple of support levels. I can see 5 waves on the 1 minute DJI chart but I don't like to rely on the 1 minute chart. Let's see what the DJI bounce off 17,826 looks like. Very nice call by the way.

  2. :-)