Monday, June 26, 2017

SPX Update

Friday was an inside day, which means there isn't much to add since that update, but let's take a look at SPX (which we haven't looked at in a while) and discuss a few options:

SPX has remained unclear all week, which is why I haven't been charting it or making predictions for this index, but I'll discuss a couple scenarios here.  First off, this patterns gets a little challenging for bears north of 2442, because that will open up a probable trip to 2445-48 -- with further potential to retest, or even best, the all-time high.  Essentially, there are two main possibilities here, from a wave perspective:

1.  The bear option is that a breakout over 2442 is simply an extended corrective wave, which will stall shy of the all-time high and reverse to make new lows.  Given the pattern leading in, we'd have to anticipate that a breakout would be part of a third wave at micro degree.

2.  The bull option is that the third wave would be nested, and thus at multiple wave degrees.  In other words, the first move to 41 would be wave 1, the second move to 41 would then be a nested wave i -- thus (for the bull option), a breakout over 42 would put SPX in iii of 3, and destined to new all-time highs.

Futures are currently pointing to a breakout open, so this is going to put bears in a difficult spot.

In conclusion, the problem is that SPX still isn't clear on an intermediate basis.  Price has overlapped the start of the prior breakout, and normally that isn't particularly bullish, so I would probably have to be a seller on any retest of the all-time high... but with a tight stop, because any breakout at the ATH puts SPX back into ??? territory.  And it's never worth fighting the tape even a little bit unless you know EXACTLY what you're fighting.  If SPX sustains a breakout over the ATH, it opens up too many options.  I still believe the market is undergoing a topping process -- but as I've said many times before, tops take time, so it's not out of the realm of possibility for that process to take a couple/few more weeks.  If SPX cannot clear the ATH, of course, then the bear options for this index will at least maintain some degree of clarity.  Trade safe.

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