Friday, December 4, 2015

SPX, BKX, RUT: Is The Recent Decline a Buy Op?

Last update talked about the potential for a complex expanded flat C-wave decline, and the market has decided to make this as complex as it can.

Let's start with BKX -- last update I stated:  "It's tough to find a pattern that doesn't ultimately exceed 76.68."  BKX exceeded that level shortly thereafter, which (perhaps ironically), gives the pattern more bear potential that it had on Wednesday:

RUT met with rejection perfectly off the noted resistance level. 

Finally, SPX might be the clearest index here:

In conclusion, because of the near-term pattern in SPX, I'm very slightly inclined to think that the recent waterfall decline is actually the c-wave of an expanded flat, and therefore destined to recover.  If SPX sustains trade south of 2019, that would at least remove some of the bull options, but not all the bull options, since the whole decline could still be a c-wave at one higher degree.  In a perfect world, bulls would like to see SPX rally from here, and bears should stay nimble since the decline could have been a small second wave and about to launch back up.  Below 2019 and we'll have to at least consider more bearish options.  Trade safe.

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