Friday, July 14, 2017

SPX and INDU: Enough of this Noise, Let's Look at the Bigger Picture

Last update noted that bears needed to make a stand, but they didn't, so numerous markets ran toward the upper end of the recent noise zone -- which is what happens when you break near-term resistance inside a thinly-traded range.  Of course, everyone is now bullish as we reach the upper edge of the noise zone, but now we're into the reverse of the warning I published near the bottom ("Just remember it's never a good idea to get too bearish this close to support -- some signals suggest it will fail, but in the end, either it breaks or it doesn't.").  At this point, it's not a good idea to get overly near-term bullish until we see a sustained breakout over resistance.

But near-term noise aside, I think the recent noise zone is becoming a bit of a distraction from the larger view (this may in fact be the market's exact intention) -- so today we're going to step back a bit from all the near-term noise and take a closer look at the big picture.

For our big picture examination, we'll focus on INDU's long-term chart.  The option not discussed on this chart is for an extended fifth of v -- I allude to the way a bear would protect themselves from that in the notes (specifically: "watching for completed patterns followed by larger impulsive turns becomes more important") -- but for now, we'll just keep that in the back of our minds and not focus too much on it unless/until the market tells us to.

Near-term (below), there are still several paths that INDU can take to complete the pattern shown on the long-term chart:

SPX has similar options (though lately we can't really rely on anything to move in sync with anything else):

In conclusion, the near-term is still a mess, but should clarify fairly directly.  Bigger picture, though, it does look like we're going to be completing wave 5 of a larger fifth in the not-too-distant future.  When that wave completes, bears should finally get some time in the sun.  Trade safe.

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