Monday, December 28, 2015

SPX and INDU: The Bottom Line is Bulls Need a Breakout

There's no material change from the last few weeks of updates, which largely anticipated an ongoing chop zone.  I realize that chop zones are often frustrating for traders, but it's actually no mean feat to spot one forming early-on.  Thus, even though several targets have fallen a hair short along the way, I'm not displeased with the overall performance of the preferred count during recent weeks.

The caveat at this moment would simply be that the farther one gets into a chop zone, the more questionable the patterns become, and the more difficult prediction becomes.  I would have preferred, and would still prefer, to see SPX clear 2076 before its next meaningful move, but we have reached an inflection point here, and it's not out of the realm of possibility for Christmas Eve to have marked the high for the current wave.  The biggest predictive challenge inside a chop zone like this one is that it's, frankly, impossible to predict when and where the b-waves will form (since b-waves don't follow the same structural rules as impulsive waves, they rarely lend themselves to being predictable).

All that said, the chart below is still my best-guess, but I may need to adjust this slightly if 2076 continues to contain the market.

INDU suggests that the best hope for bulls is an ending diagonal c-wave, but that pattern still suggests a new low below the low of red i.

In conclusion, there are always outlier patterns, so one can never grow so complacent as to say something's "impossible," but an immediate breakout from the market's current position does look unlikely.

Essentially:  The only immediately bullish pattern possible in INDU would be if red B/2 on the chart above is actually the smaller-degree b-wave of an expanded flat, which would instead make "red i" ALL OF "bull: C."  But again, that presently looks less likely.  A sustained breakout through 18,000 is still required for bulls to cast doubt on the bear scenarios and put themselves back in the running.  Trade safe.

(Very late expansion chart for this update -- I just realized that I forgot to even show the preferred count on INDU's chart.  Sheesh, holidays!  Anyway, I guess I figured I outlined it clearly on SPX, so I was sort of assuming it went without saying that INDU would be expected to follow a similar path. Nevertheless, here it is in black and white (aka: "blue and green")):

No comments:

Post a Comment