Monday, September 19, 2016

SPX, NYA, BKX: NYA Finally Tests Support, and...

Okay, Friday's action was pretty boring, so let's start out with one of the charts I would have uploaded on Friday had Stork Chorts been working properly.  The chart below is NYA, and I haven't updated it in more than a month.  It's interesting to see how the market has behaved relative to the red trend line I spoke about back in July and August:

Now, when I look at a chart like that, I'm a bit torn.  My Elliott Wave nature makes me want to short any bounces here (because of a suspected larger bearish pattern), while my classic TA eye says that a bounce here (from a back-test of support) has to be respected.  So what's a guy to do?  Well, I think you just have to choose entries carefully at times like this.  If you're inclined to short and aren't holding from higher prices, then you probably either wait for a decent rally back towards the recent highs, which provides a low-risk entry, or you wait for a breakdown of support.  What you DON'T do is short randomly because you're anxious about "missing a big move."  There could very well be a big move pending, and a decent decline is quite possible -- but we can't trade "possible" as if it's a sure thing... well, we can't unless we wish to ultimately end up searching underneath the couch cushions for "spare" change, if you catch my drift.

Let's look at the levels that may act as warning signals (for bears) in SPX:

Finally, BKX, which also makes me think that the odds at least slightly favor bounces as short ops:

In conclusion, the market has recently tested support, and so far that test has held.  That has to be respected and kept in mind.  Despite that, I am slightly more inclined to believe that bounces should be sold until proven otherwise -- but due to the nature of this pattern, which is not crystal clear, I would highly suggest that bears make every effort to keep their risks manageable and stay nimble.  Bulls, of course, are simply watching support now.  Trade safe.

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