Monday, December 14, 2015

SPX, NYA, INDU: Looking Back to Look Forward

This has been, and remains, a difficult wave to count.  The most interesting fact for bears is how the market turned right at the bear inflection point that was identified more than a month ago, and how that price point has continued to contain all rally attempts.

Let's take a look at some of the market's options from here.  We'll start with the bigger picture INDU flat, which was first hypothesized nearly two months ago.  That count isn't a "done deal," by any means, but it's certainly alive and well.  Bulls still have options for a bullish fourth wave, and those options remain reasonable for the time being.

NYA also revealed the inflection point in real-time, and that point has continued to hold:

A slightly larger view of NYA:

Finally, SPX continues to amaze by following the path outlined all the way back on October 23.  More recently, there was a bit of confusion near 2093, which I believe resulted from a failed wave.  In my opinion, the wave from red (b) to red (c) is impulsive -- and therefore likely to be a rare "failed" (c)-wave. 

Just for fun, here's the original annotation from October 23 (second one down):

In conclusion, bears have kept their intermediate options open by continuing to hold the price point where the rally needed to end for the most bearish counts to stay alive.  That doesn't necessarily mean the bears win yet; it simply means the market "saw" that price point the same way I did, and is respecting the bear options.

On the other side of the coin, thus far bull have held the near term zones they need to.  All that could change today, of course -- but at this exact moment, nothing has been set in stone just yet.  This remains a difficult wave, so I would recommend neither side get complacent here.

Just for fun, my "perfect world" count would see us rally back up to retest the high again, then decline back to test the most recent relative low (either Friday's low, or a minor new low this week).  The bottom line, though, is that bulls need SPX to sustain a breakout over 2117, and more importantly, the all-time-high.  Otherwise, best case for bulls is probably a sideways grind; worst case is a significant decline.  Trade safe.

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