Friday, January 8, 2016

SPX and NYA Updates: Bulls Running Out of Real Estate

There's not much to add since last update, except to note that bull hopes for a short-term reprieve in the form of an expanded flat C-wave appear to be dwindling.  We're into "last stand" territory now, and if bulls can't get something going directly, we're probably going to have to assume that the most bearish count is unfolding.

I noted the longer-term targets in the annotation above.  I'd intended to update some of the longer-term charts -- but I ended up spending so much time studying various charts that I simply ran out of time.  I'll try to update some of the big picture charts for Monday's update.

I did briefly update NYA's chart, which is hard to view as particularly bullish in appearance at the moment:

In conclusion, at this juncture, the main point to be aware of is that if bulls cannot find support soon, this could easily turn into a crash wave.  The position of this wave in the big picture is either C or 3, both of which are third waves, and third waves tend to be the longest and strongest waves within a pattern.

Ralph Nelson Elliott described third waves as "a wonder to behold," and for good reason.  Third waves are strongly-trending waves, so oscillating indicators such as RSI often push right through the extremes that would normally generate a turn, while failing to generate said turn (though they do sometimes generate a small countertrend move).  The "right" way to trade a third wave is to simply let your positions ride until the market says you shouldn't, and it will usually say so fairly clearly.

The question heading into a third is always "is this a true third wave?" and the market never rings a bell to let us know for sure.  In the current move, the pattern potential for a third wave is definitely present -- so if bulls can't get anything going directly, then shorts may just want to sit back and watch their profits accumulate for a while.  Anyone who shorted the predicted turn zone (north of 2076 SPX) is 100 points to the good right now, so the hard part is over, and it's only a matter of protecting profits from here.

Of course, NONE OF THAT IS TRADING ADVICE -- just something to think about.  Trade safe.

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