Monday, May 4, 2015

SPX and INDU: Is the Market Plotting to Add Insult to Injury to Both Bulls and Bears?

On Friday, bulls put together a decent rally, thus trying to convince us that perhaps they had indeed completed wave 2 of the bull count at 2177.  Of course, we are still within a six-month trading range, and range-racing is the norm at this point -- so we have to at least remain aware of the fact that fast moves don't necessarily mean much within a range. 

The true extent of the current noise zone is best illustrated via the Dow Jones Industrial Average Ordinary Mediocre:

With that chart out of the way, or still in the way, as the case may be, let's take an updated look at the bull and bear options.  First, the bull option, which shows SPX having recently completed a fourth wave triangle.  I've continued the bull count onto an additional chart, for purposes of better illustration -- so we'll pick up again on that additional chart in a moment.

Before we get to the bull count continuation chart, let's take a quick look at the bear count, which still remains technically valid after Friday's rally:

And now back to the bull count... 

I've been toying with the idea of a diagonal for several months now, and have mentioned the idea previously on more than a few occasions -- but the market may finally be offering one hint as to how a diagonal could materialize here.  I've shown that option on the chart below:

In conclusion, we're still stuck in what is, at this point, a pretty old chop zone, so the market continues to keep numerous options on the table.  The diagonal might make a nice final way for the market to add insult to injury to both the bulls and the bears, but for the moment it has to be treated as speculative until there is a bit more evidence to support it.  Trade safe.

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