Wednesday, September 9, 2015

SPX, NYA, INDU: Will the Fed Stick-Save the Bulls, or Hang Them Out to Dry?

Last update discussed that, from a long-term perspective, it was still too soon to say if we had completed/were completing a high-degree fourth wave, or if a new bear market had begun.  Near-term, I noted the potential of a complete fractal and the possibility of an immediate top, and since then, SPX dropped 80+ points, which, as of today, it will have also recovered.

From an analytical perspective, range-bound markets are typically the most annoying.  After a while within a range, I've often found that traders begin to imagine all sorts of things, and ranges typically make people either more bullish, or more bearish, depending on whether we're near the top or the bottom of the range.  Right now, we're near the top, so bullish is in fashion -- but I always like to remind myself that nothing happens within a range.  Something happens when it sustains a breakout or breakdown.

Let's start with the long-term chart that I started publishing back in March, when I began suggesting that a major correction was drawing near.  The decline was a bit violent for a fourth wave, but that's not impossible given the historical rally that preceded it.

One of the things I wrote about more than a year ago was that the first major screw-up by a central bank would likely lead to a the big fourth wave -- but that they would probably recover from the first screw-up, and that would lead to the big fifth wave, just when bears were convinced the end was beginning.  I recently read some interesting comments from Peter Schiff, who argues that the Fed's talk of rate hikes played a strong role in the market crash, and that QE4 is forthcoming, because the Fed has no other way to continue the bubble economy.  That would play into my standing theory that the central banks might stick-save the market just when things began to look bleak, and thus create another leg up in the bull market.

Under this theory, eventually, the monster they've created will indeed spiral out of their control, and that will be when we finally see the "real" bear market.  That is, of course, presuming it hasn't begun to unravel just yet -- which it very well may have.

Let's start with the super-simple long term chart:


Next, the less-simple long term chart:

Below is a near-term chart of NYA, which notes the market's interesting position relative to base-channel resistance.  This chart focuses on the most-bearish near-term count.

SPX near-term:

In conclusion, at this moment just about everything that could be up in the air, is up in the air.  Near-term, we've been stuck in a range.  Intermediate and long-term, we don't yet have a clear impulsive decline.  Hopefully the next few sessions will at least begin to eliminate some of the near-term options, which will allow me to flesh-out the intermediate picture a bit better.  Until 1994 is claimed, the most bearish near-and-intermediate-term options remain on the table.  Trade safe.

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