SPX and BKX: Bull Count vs. Bear Count

Last update discussed the possibility that wave 4 was completed, but also discussed the potential problem regarding the appearance of a corrective low (b-wave low).  Today I've annotated a few additional charts to give traders some signals to note and signs to watch for -- and I'm going to let the charts take it from here.

Let's start with the SPX 1-minute chart, which contains discussion about several details:

Bigger picture, nothing to add:

BKX kept us looking lower right up through Monday, but there's no crystal clear outlook here just yet (one could, of course, simply subscribe to the bull interpretation of a completed correction, as long as one manages entries and risk properly -- nothing wrong with that and NOT TRADING ADVICE).  The chart which follow this one will show what bears need to do if they want to keep fighting here:

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SPX Update: Micro Patterns vs. Recent Market Behavior

For the past couple months, the market has been pretty clear, and SPX has captured all my targets both to the upside and to the downside.  As of right now, though, the crystal ball has gotten at least a little bit murky.  Let me explain why:

First off, it's entirely possible that the decline is a perfect ABC, to wrap up the anticipated red 4.  The thing holding me back from calling the bottom with more conviction is the b-wave "look" of the 2322 low in SPX (and other markets).  On the flip side of the coin, the thing holding me back from saying "That's a b-wave, so there's more downside coming!" is that earlier in the year, there were a few similar-looking "false b-wave" patterns that ended up being fully-complete corrections -- and the market never looked back.

So I just can't say with certainty whether the correction is done or not.  If it hadn't been for the "false b-waves" earlier this year, I would say it wasn't -- but since the market has been behaving differently in the recent past, that has to be respected.  If we ignore the b-wave look, then we have a perfect 5-3-5 ABC correction down, which would suggest a completed decline. 

In conclusion, I find this to be a bit of a quandary, so you'll just have to decide for yourself which way to play it.  On the one hand, I'd like to lean bullish based on recent market behavior and on the fact that if we ignore the "apparent b-wave," the pattern makes a nice ABC 4th wave -- but this is challenging for me, because leaning even slightly bullish goes against my philosophy of living by the sword/dying by the sword regarding the micro patterns (since the micro pattern in this case wants me to be bearish).  In any case, obviously, any sustained break of Monday's low calls for significant caution from those of the bullish persuasion.  Likewise, if we see impulsive declines forming, then we might heed those as an early warning.  For the record, IF the recent rally was/is a c-wave, then it will end abruptly, and it already has enough waves up to be complete (though one more new high would be acceptable and might look better).

This is just how it sometimes goes, especially after a long run of clear reads and captured targets -- eventually the market has to throw a curveball into the mix to keep things from being too easy.  Hopefully, this situation will clarify further in the next few sessions.   Trade safe.

SPX, RUT, BKX: Bears Still in Control

Last update noted that there were enough waves in place for red 4 to be complete in SPX, but that BKX was still suggesting further downside, and I wrote:

On the chart, the prospect that the final low is in for BKX looks a bit shaky, and a new low or two in BKX would not surprise me at all.

Apparently the BKX chart was leading the way, and during Friday's session, it became apparent that SPX was going to follow.  Not only did SPX make a new low, but it made a low in such a way that the only hope bulls had was for an expanded flat, which would still point to lower prices.  I mentioned this in our private forums on Friday night/Saturday morning:

Bigger picture, if this is NOT simply the fifth wave lower of wave c (which we will not be able to determine immediately), then prospects for an even deeper correction will manifest.  We're going to have to watch this in real-time to determine if this is the case, for an additional reason:  Keep in mind that the label on the charts has been "3/c," because if we see a larger 4/5, then we'll have an impulsive decline, and we'll be dealing with a rally followed by yet another significant leg down.  And that could even eclipse the current low end of the price targets (high 2200's).  Again, we'll simply have to determine this as it unfolds.

BKX was pointing the way:

And RUT looks poised to come close to, or capture, downside Target 3:

In conclusion, this pattern has become a bit more near-term bearish now, and the market announced that during Friday's session.  We're simply going to have to see how the pattern shapes up from here, in order to determine if an even-larger intermediate correction is underway.  Trade safe.

SPX and BKX Updates

Last update I mentioned how it was unlikely the bottom was in yet, and that I expected at least a couple micro fourth and fifth unwinds before a bottom would become possible.  We got the pattern I was anticipating, and now there are enough waves in place for a complete decline.  I cannot unequivocally state that the decline is complete, only that at least now the potential exists for it to be complete.

Bigger picture, it's interesting how perfectly SPX tested the confluence I'd drawn on this chart:

BKX has reached its first downside target zone.  On the chart, the prospect that the final low is in for BKX looks a bit shaky, and a new low or two in BKX would not surprise me at all.

In conclusion, there are now enough waves for a complete correction in SPX.  A minor new low is okay, but any sustained breakdown would need to be approached extremely carefully by bulls, as it would open the possibility of a notably deeper correction.  Trade safe.

SPX and RUT: Downside Target 1 Captured

It's been an excellent month for the preferred count.  At the beginning of the month, SPX captured November's standing 2400 target to the point (good for about 200 points of profit), then reversed.  Since that target capture, the preferred count has continued pointing toward lower prices, and the chart published a week ago was an exact dead-on hit:  The market rallied, the rally turned where projected, and the decline has now captured the first downside target zone.  That projection alone represented another nearly 70 points round trip -- so now here we are wondering if the market will find support soon.

As of this moment, it's foolhardy to call a bottom, because most markets closed on or near the lows of yesterday's session.  That doesn't mean we can't bottom directly, it just means that it's ill-advised to call a bottom when the market goes out on the day's low -- just as it would be ill-advised to go to Vegas and bet your entire life savings on one spin of the roulette wheel (with the understanding, of course, that "ill-advised" doesn't mean you couldn't win anyway!).

Thus, as of right now, we have to see something more from the market to know if it's going to bottom here or not, and today's charts will have to reflect that current reality.  Most of the time, I'd say that this pattern at least LOOKS like it needs to unwind some micro-fourth and fifth waves before it could bottom -- so I'd typically expect to see at least another marginal new low or two, (which, if we see the decline slow, would also serve the function of absorbing some of the inertia from yesterday's sharp drop -- and absorbing that inertia is the first step before it can be reversed).

RUT's pattern has taken on a potentially dangerous look, and bulls will need to put the brakes on this as soon as they can if they wish to stop this pattern from acting as a head-and-shoulders.  Bulls would like to see a sustained whipsaw of the neckline, followed by a breakout over the falling blue trend line.

In conclusion, the market has captured the upper edges of the first downside targets, but there's no clear sign of a bottom yet, so at least marginally lower prices are still likely.  With the chart's current appearance, we also cannot yet rule out the possibility that a deeper correction is in progress.  So, just as in the prior update: lower prices still look likely -- the main question is how much lower, so we'll just have to watch how the market reacts to this first target zone.  Trade safe.

SPX and BKX: No Suprises... Yet

Still no change to the recent updates.  The market has tracked its projections well all month.  The current alternate is that ALL OF blue Bull 3 is complete, which (if it is) would then put us in Bull 4 down, with Bull 5 up still to come.

The near-term count outlined in the prior update has performed according to expectations so far.  Keep in mind the potential that ii/b and/or 2/b may still be unfolding.  Also bear in mind that the bearish overlap noted is not a "set in stone" overlap, because the overlap could be part of a subwave of 2/b, which would not violate any rules:

BKX has also held up its end of the bargain all month and honored the red iii label since March 3:

In conclusion, everything continues to track well, so the market's given us no reason to radically alter the recent outlooks.  Trade safe.

SPX Update: T1/T2 Captured; No Change

No change from the prior update.  SPX captured upside targets 1 and 2, and has, so far, followed the map that was outlined in the last update.  Obviously, all bearish near-term bets would be off with sustained trade above the all-time high.  Keep in mind that this correction is, presently anyway, ultimately expected to resolve higher either way.

Haven't moved anything on the IT chart since last update:

In conclusion, there is no change whatsoever from the prior update.  Again, near-term bearish bets have to be called into question with sustained trade above the all-time high.  Trade safe.

SPX Update: A Bit More from the Market

SPX has chopped sideways since last update, and the pattern now makes me inclined to believe that the odds of another leg down are better than 50%, so I have updated the charts accordingly.  This is still a pretty tight call, but we probably have to lean this direction unless and until SPX sustains a breakout over the all-time-high.

I have also adjusted the upside targets for the possible (smaller) second leg up, which apply if SPX clears the 50% Fib:

NOTE TYPO -- Obviously, upside targets are 23xx, not 22xx!

The intermediate chart shows my preferred path, give or take a few points:

In conclusion, this remains a tight call, but I'm going to go out on a limb and say that a larger second leg down appears to be the most probable resolution to this pattern.  I am a bit less confident of the smaller second leg up that might precede it -- but the larger second leg down does look to be of reasonable probability.  Trade safe.

SPX and BKX Updates

Let's get right into the charts today, starting with the SPX intermediate chart.  On the chart below, it's important to note the back-test of the red trend channel.  Bears need the market to fall back into that channel and sustain trade and closes to really get anything going.  Bears beware any trip below the channel that is relatively short-lived, though.

Near-term the rally was rejected by the 50% Fib retracement, but will have a shot today at claiming that level.  The next near-term targets are noted:

BKX has the appearance of a market that may continue correcting for a while, though since this is presumed to be a larger-degree 4th wave, it can grind traders up if it wants to:

In conclusion, my conviction on SPX's next move remains marginal, while BKX does look like it wants to continue correcting.  Near-term bearish bets on BKX are off if it sustains a breakout over the presumed wave iii high, of course.  Trade safe.

SPX Update: Downside Targets Captured

There is at least one material change from last update... in the last update, I didn't feel at all confident that the decline was over, and it turned out it wasn't.  Now at least I feel it has the chance to be over.  I'm still not certain if it will form a b-up and c-down, but it could at least be complete as the entire 4th wave if it wants to.  A bit more detail and some possible resistance zones on the chart below:

If this turns into a more complex fourth wave, then we'd be alert for a trip toward the lower red "4?" after a bounce completes.  Note the perfect back-test of the old red channel:

In conclusion, the decline has now cleanly captured the targets I drew on March 3, so if this is the entire fourth wave, then we've likely seen the bottom and will head toward blue Bull: 3 next.  The downside target capture is notable in the sense that the market has shown a lot of strength prior to this decline (and strong markets often FAIL to reach downside targets), so if the market starts to struggle with the upside resistance zones, then do at least stay alert to potential for a more complex fourth, and a trip toward the second red 4 on the intermediate chart.    Trade safe.

SPX and RUT Updates

Last update, I stated that I was inclined to think we'd see further downside, which has since happened.  Although we're in the zone of the first "red 4" label on the IT SPX chart, it's not clear to me whether or not the downside is complete at larger time frames, and the near-term pattern has turned into a choppy mess.

I would at least note that this is being counted as a fourth wave, and confusing patterns are the norm for fourths -- so don't be surprised if this chop continues for a while.  For example, we could see a near-term rally followed by another leg down, and the market could thus extend the move sideways/down for even several weeks if it wants to.  I can't predict that from the market's current position, but that potential needs to be kept in mind.  Since we tend to "want" the market to move in a more linear fashion, it's human nature to anticipate quick resolution -- especially after the fast linear rally we just came out of.  I'm simply warning that "quick resolution" does not have to be the case here.

SPX reached the zone near the first red 4 from last update, so it's always possible that's it for the downside, but I do think it's prudent to at least be aware of the potential for a confusing chop zone to develop.  

RUT looks like a B-wave into the recent 1414 high, which would make the current decline a corrective C-wave.  RUT has already reached its minimum downside expectations, and I've noted the red trend line as the next zone to watch if the downside continues:

In conclusion, in the last update, more downside looked likely, and we got that -- but now it's currently unclear if that will be all she wrote for the entire correction, or if it's going to become more complex by adding another wave up and another wave down.  Hopefully the next few sessions will help answer that question.  Trade safe.

SPX Update: The Market as a Quantum Probability

Quantum physics tells us that particles don't exist prior to observation.  Instead what exists is a wave of probabilities as to where the particle might be found (note that this is not a wave of probabilities as to where the particle actually "is" -- the particle simply does not exist in any real sense until you observe it!)

Sometimes I think of the market in similar terms, as a "wave of probabilities."  In a way, that's all it can ever be.  Nothing is guaranteed -- although some patterns do seem to exhibit a form of causal determinism (often, once a certain portion of a fractal forms, the market seems compelled to complete that fractal).  The challenge is that the market can sometimes go for decent stretches without forming such deterministic patterns in the first place.  In those instances when no deterministic pattern is unfolding (at least insofar as this: even if the entire market IS causally determined, we can't always pinpoint the prior move (the "cause") -- so from a practical standpoint, we would still consider those patterns nondeterministic), which constitute the majority of market moves, then we are dealing solely with probabilities.

I think one of the errors folks, especially less experienced traders, sometimes make when attempting to apply Elliott Wave (and other systems) is in thinking that EVERY pattern is, or "should be," a clear manifestation of causal determinism -- so they believe they know exactly what's coming next.  If one takes that view, then it leads to overtrading, over-commitment of capital, and/or frustration when things aren't clear-cut.  It's always best to remember to allow for contingent possibilities, and to thus view the market more in a quantum framework than in a Newtonian framework. 

Short-term, the probabilities seem to favor at least one more leg down.  Though my first inclination is that we'll follow the blue path and bounce around a bit first, it is technically possible that b completed on Friday.

Bigger picture, the probabilities still seem to favor that the bull market isn't over yet:

In conclusion, there was little movement on Friday, so there's no material change from the prior update.  I'm still inclined to think we'll see another leg down, but this rally has surprised me before.  Trade safe.

SPX and BKX: November Targets Captured

Well, November's 2400 target was finally captured, good for about 200 points of profit.  Amazingly, it was captured to the point -- and shortly thereafter, SPX suddenly dropped like a rock.  Bears undoubtedly want to know if we're "there" yet, and the chances are that no, we're probably not.  However, a decent near-term correction can't be ruled out.  I'll let the charts take it from here:

A closer look at SPX:

And an update to BKX, which has also captured its first November target zone.  Here again, we can see that the waveform would look better with at least one more 4 and 5... possibly more (from a larger perspective):

In conclusion, SPX and BKX have both captured intermediate target zones, and the market reacted.  We could see a near-term correction now, but odds are good that the bull market is still underway in the bigger picture.  That said, we'll keep an open mind to all options for the moment, and do our best to react appropriately if the market dictates that we need to.  Trade safe.

SPX Update: Rally Continues on Important Hair Ban

No material change from last update, except to add a few notes:  It appears wave (4) was indeed complete, and the current wave does seem to be subdividing.  The near-term chart below contains the details, along with the addition of Target 2:

Whoops, wrong chart!  Here's the chart I thought I was posting:

Long-term, there's still no change, which, although boring, is a good thing because it means there have been no big surprises for my readers:

In conclusion, it appears the market rally will continue due to the recent "Nice Hair" ban, which is as good an explanation as any that the major media outlets ever offer.  I would have said it's rallying because we're in a third wave and that's what third waves do... but what do I know.  In any case, for Pete's sake, do something to screw up your hair before you get hauled off to jail.  Trade safe.