Wednesday, January 6, 2016

SPX Update: Market's Options Still Range from "Bearish" to "More Bearish"

Still no material change from the last few weeks of updates.  Monday's update concluded:

In conclusion, in the bigger picture, TRAN remains the fly in the ointment for bulls.  As discussed previously, it appears to have changed trend at higher wave degree (from up to down).  This remains significant because TRAN tends to lead the broad market. 

On the shorter time frames, the pattern still suggests two things:  It's incomplete, and it's pointed lower.  An incomplete pattern pointed lower is not helpful to bulls -- it's like a "to be continued" TV episode; it's essentially a tension on the market, and it seeks resolution in the form of lower prices.  Thus, the best case for bulls appears to be another down/up/down sequence that could then have the potential to find a bottom (again, though, that would be from lower prices).  The best case for bears is the potential bear nest shown as "MB" on the SPX chart, and which precipitates a waterfall decline.

That's where things still stand.  Accordingly, I've added the "most bearish" targets to the SPX chart; that way, if the market simply keeps dropping through potential support zones, folks will have some idea of where to look next:

In conclusion, the most significant takeaway is that bears still appear to be in control of the market for the foreseeable future.  On December 21, I sounded the alarm bell rather loudly and warned there was potential for a 4000-point decline in the Dow Jones Industrials.  I also stated rather plainly that henceforth "we're going to operate under the assumption that the intermediate edge has to be given to bears." 

I haven't seen anything in the last three weeks to negate that read.  To the contrary, the market has played along, and behaved bearishly, which only underscores my prediction. 

Folks have asked me what the intermediate bull count is here -- but there are good reasons I haven't been publishing an intermediate bull count.  I simply haven't seen a decent bull count that fits the wave structures.  And I still don't see much that would give bulls any hope (beyond short-term potentials, of course -- it's a pretty bearish pattern when my "bull" count has remained intermediate bearish for several weeks in a row.  I actually do my best to see both sides of the trade, so when all I'm seeing is "bearish" and "more bearish," it's rarely a good time to be a bull.). 

Based on the overall waves, the best-case intermediate bull count likely still entails a retest of the zone around the crash low -- and, to my way of thinking, a 150 (or so) point drop can't be called "intermediate bullish."  Not from where we sit right now, it can't.  A drop like that can only be characterized as "intermediate bearish" from our present vantage point.  Thus, for the time being, bears still appear to have control of the market, and bull hopes still amount to only a short-term reprieve.  Trade safe.

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