Monday, February 8, 2016

SPX and INDU Updates: Odds for a Meaninful Low Continue to Diminish

When I published Friday's update, I remained noncommittal on the short-term waves -- but shortly after the open, the market revealed its intentions rather plainly, and I posted the following in our forums at 9:55 EST:

Much as I hesitate to commit to a near-term proposition here, as long as bears hold 1927, today looks biased down. I think if we rally back to 1920ish, it's a decent sell op for a trip back to at least 1897, possibly a lot lower. If we don't rally, then we might already be inside a small nested third wave decline. NOT TRADING ADVICE

I followed up after the close with:

Funny how you can study charts all night and find nothing overly revealing, thus ending up with: 'Well, heck, this could still go either way,' -- but then you see something in the first few minutes of trade that tells you which way it's heading.   I later noted that the pattern argued for further downside, and today, futures are indicating a gap-down open in the SPX.

As noted in previous updates, the (pending) breakdown at 1872 argues that we're probably not forming a significant bottom, but the question at the moment will be whether ALL OF wave (4) completed at 1947, or whether the market will form a more complex corrective fourth wave, as shown by the black "or B?" and "or C of (4)" on INDU's chart below.  A complex fourth would give the decline a bit more symmetry, but it's certainly not required:

 The 5-minute SPX chart (below) notes some potential targets:

In conclusion, the odds for a meaningful low continue to diminish, and the main question seems to be whether a simple fourth wave is already entirely complete, or whether it will take a more complex form.  A complex fourth could find support near either side of the 1812 low, so keep an eye on that zone if we get there.  To the upside, bears would like to see the zone around 1880 act as resistance to any rally attempts.  Trade safe.

No comments:

Post a Comment