Monday, October 5, 2015

SPX and INDU: No Surprises from the Market Yet

The preferred count of the past several weeks remains alive and well -- note that the market bottomed inside the target zone (1867-80) and has since launched into a strong rally.  The present expectation is that this rally will likely exceed 2020, but will still ultimately prove to be a correction to the prior decline.  At present, I am not yet expecting new all-time highs just yet.  This could change if, for example, TRAN exceeds the levels noted in the last update.

Below is the preferred count, which is materially unchanged since early September; in black, the more bearish alternate is shown.  Due to the rather meandering nature of the prior wave, it's always possible that the current rally will develop in into a three-wave move, instead of the anticipated five wave move.  Also note that the only "requirement" of a (c)-wave is that it break the (a) wave high (1994).  It does not actually need to break 2020, though it would be more common for it to do so.

The INDU chart below shows that a break of the (a)-wave high would allow the pattern to maintain symmetry:

Finally, the SPX near-term chart, along with common targets for the current wave.  As long as the green acceleration channel holds, bears should be extremely cautious about trying to front-run this rally:

In conclusion, the market has followed the preferred path well enough to make it profitable -- so at the moment, there's no reason to begin favoring a different count.  I will, however, continue to play devil's advocate to my own expectations.  In the event we begin to see impulsive declines, we may have to give more weight to the more immediately bearish counts.  Trade safe.

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