Wednesday, May 11, 2016
Last update was heavy on warnings for bears not to presume the market would continue lower from then-current levels, and yesterday saw SPX rally to the biggest one-day gain it's had in a couple months. It's actually pretty amazing how well SPX followed the black path laid out on May 4, turning within pennies of the noted 2040 level, then running up to break the 2083 price point:
The near-term charts have been kind to bears, providing plenty of sign-posts along the way, and on Friday, due to the falling wedge (aka: diagonal) in the charts, I added a warning to bears if SPX reclaimed 2052ish. That exit saved about 32 points of drawdown.
With SPX having broken 2083, we're now into the inflection point for the "bull" abc count shown above (now the "bear" abc count, since bullish/bearish are relative to the current price point -- on May 4, at then-current levels, it was a bullish count) -- the only thing is that it's not quite as clearly bearish as it appeared it would be back on May 4. This is because the entire decline took the shape of a diagonal (something I couldn't have known would happen back on the 4th), which gives bulls an out. As mentioned last update, I'm still very slightly inclined to favor the bears, but this is not a high-probability call anymore.
Finally, the 2 hour chart, with nothing to add since last update:
In conclusion, to reiterate: SPX is now in the bear inflection zone (though it could run a little further to the upside, if it so desires) -- beyond that, there's nothing else to add from the last couple updates. Trade safe.
Posted by PretzelLogic at 3:33 AM