Wednesday, March 2, 2016

SPX and NYA: Bimodal Market

Last update noted that SPX had effectively reached its 1963-70 target zone, but that:

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.

There was indeed some additional downside still to come, but the wave did not develop into an impulsive decline, so bears continued to remain on the sidelines.  We now have a near-term pattern that could be an ending diagonal (aka: "bearish rising wedge"), but still no impulsive declines, so we can't confirm this pattern as particularly bearish just yet, and it could just as easily be a more bullish pattern.  It can be tiring for bears waiting for an impulsive decline -- but waiting (patiently or otherwise) is decidedly less tiring than front-running ambiguous waves and repeatedly getting blown out of positions.

We're going to keep the charts pretty simple today.  First is SPX:

And next is NYA, which has inched its way past first resistance:

In conclusion, we now have a pattern which is somewhat bimodal:  Bears are hoping for an ending diagonal that is complete or nearly-so, and which leads to new lows fairly directly -- while bulls are hoping this is a classic double-bottom, which could be aimed as high as 2060ish.  As I've repeated many times over the past few weeks, the wave remains ambiguous, so the conservative course of action is still to await an impulsive decline, which will be our first solid signal that this leg of the rally is ending.  Trade safe.

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