Wednesday, October 5, 2016

SPX Update: First Downside Target Captured

I'm exhausted to the point of... uh, exhaustion this morning, so I'm going to let the charts do all the talking.

First up is the SPX 5-minute:

SPX 1-minute:

Both of those charts talk about the potential for at least a near-term rally from here, so let's look at the most immediately bearish potential for comparison:

Now, none of the charts above discuss the bull option in any detail, but I have mentioned at least one such option briefly over the past several weeks.  The bulls do have several potential patterns in play here -- one possibility would be for the entire move off the all-time high to be a fourth wave triangle.  If we followed that pattern to its logical conclusion, then it's technically possible for 2144 to mark the bottom of wave e of that triangle, and head straight up to new ATH's from here.  I'm not favoring that, but it pays to be aware of such things, especially at inflection points (one of which was just reached).

In conclusion, I'm still inclined to favor the bears heading forward, but bulls do have near-term options to add additional confusion to the pattern, and larger options for a more meaningful rally.  Hence, yesterday's target capture signaled a reasonable inflection point for bears to begin behaving at least somewhat cautiously.  Trade safe.

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