Monday, February 29, 2016

SPX and INDU: Out on a Limb... Again

On February 22, I revisited some calculations, and came up with 1963-1970 as the potential target for the current wave.  On Thursday, SPX broke above 1947.20 just before the close -- then, on Friday, it gapped up to 1962.96 and reversed.  Several people have since assured me that this was "close enough" for me to call the 1963 target captured (but I still feel a tinge of guilt in labeling it "captured" on the chart below -- such is the nature of being a perfectionist).

So far, we do not have an impulsive decline from 1962.96, but the near-term pattern does appear as though it may at least need some additional downside, so it could ultimately develop into an impulse.

I'm going to step a bit farther out on the proverbial limb, and suggest the red path below as one possibility:

Finally, in order to assure that Friday marks a decent high, we're going to take a quick look at an intermediate BULLISH option.  As long-time readers know, when I've been favoring a market direction for a while, one way to "guarantee" that the market will indeed head that direction is for me to finally publish a chart that discusses the other side of the trade.  (I say that facetiously, but it works more often than not!)

In conclusion, the overall wave remains ambiguous, and bears still don't have a truly impulsive decline to hang their hats on.  The 1963-70 zone has provided at least some degree of resistance so far, but it remains to be seen if that resistance will be short-lived or not.  Another smallish wave up would be okay for the immediate bear case, but a sustained breakout would call for bear caution.  Trade safe.

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