Monday, October 26, 2015

SPX, COMPQ, NYA: A Bigger-Picture View

On Friday, SPX captured the "textbook" target of 2071, first published two weeks ago.  This came on the back of the preferred count's prediction (from September 21) that SPX would reverse from 1865-1880 and run up to the 2040 zone.  All in all, it's been a pretty solid month for the preferred near-term count.

Here's where I would caution readers:  Sometimes I can interpret one portion of a fractal pretty clearly, but then have to try and "puzzle piece" that portion into the larger fractal, which may not be as clear.  The last six weeks or so have been an excellent example where the fractal at one wave degree seemed fairly clear to me, but the larger wave degree seems a bit less clear.  It's tempting as an analyst to take a strong stance and pretend you know what the market will do at all times, but the reality is, nobody knows that.  In other words, please don't assume that simply because the last 300 or so SPX points have followed the preferred count's path that the big picture is "in the bag," as they say in the bagging industry (or wherever people say that).  The big picture fractal is decidedly less clear than the near-term fractals have been (kind of funny to call 300 SPX points heading both directions "near-term," but I'm not sure what else to call it).

Let's start with an interesting big picture chart.  This is a chart I hadn't updated since 2013, and I stumbled across it this weekend in an old chart-book.  What's interesting is the very-long-term trend line, shown in blue, which runs all the way back to 1974.  That's 1974 as in the year John Denver's Annie's Song was at the top of the charts.  You know the song, it's about population explosion (lyrics: "You filled out my census, like a knight at a florist...")

Over the past few weeks, I've been looking for earnings plays, and that involves scanning charts of individual issues that I wouldn't normally look at (obscure companies with names like "Jumping Turtle Consulting Management and Motorcycle Repair, Inc., LLC, Co." (symbol: *$&#??)).  While doing this, I've really noticed that stocks were sold indiscriminately during the crash, but there's been a focus on perceived quality as money has come back into the market. That's why the blue chips are outperforming, while a fair number of more speculative issues are still near or below their crash lows.

This is pretty self-evident when one looks at a chart comparing the broad-market-based NYA vs. SPX:

A long term chart of SPX provides some additional perspective:

Finally, a quick look at the 30 minute chart, updated only with Friday's price action.  What's interesting on this chart is SPX's break above the black trend line.  Bears need that to whipsaw -- although a whipsaw won't guarantee downside follow through, if that trend line acts as support, it would be decidedly bullish.  Note Friday did a little test of that line, and bounced, but there's too little action since the break to be informative:

In conclusion, the market is in an intermediate inflection zone, and the next few sessions have the potential to make-or-break the bear case.  Trade safe.

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