SPX and BKX: Bears Fumble on the 3 Yard Line... but the Game's Not Over Just Yet

Well, yesterday was both good and bad for bears.  It was a great day for anyone who was trading the charts on a short-term basis, as the near-term preferred count had been anticipating a break below 2437 and the SPX cash market opened way down at 2428.  This made for an easy 22+ points of profit for anyone who sold the 2450-54 target zone and closed in the downside target zone (which, for cash traders, would have entailed taking at least partial profits directly upon the cash open). 

But the market quickly recovered, so the day ended up being a disappointment for any bears who were holding out hope for more follow-through.  This behavior forces bears to be a bit cautious going forward, because that type of price action suggests a lot of buyers were waiting in the wings (more on this later).  So if SPX sustains a breakout over next resistance (2455ish), then bears will have to behave even more cautiously, especially until the next target is reached, and/or until the market gives signs of reversing.

That said, there is still a chance that 2455 resistance will hold and that yesterday was a "one off" for bulls.  The upcoming sessions will answer that directly.

BKX is worth another look here, because it's indicating that it's reached an inflection point, but also indicating that if this inflection point fails, it is likely to fail significantly.  The preferred count remains bearish for now. 

(NOTE:  For some reason, Stockcharts is severely messing up my labels here, no matter how many times I try to fix them.  So please forgive the sloppiness of the chart.)

In conclusion, yesterday indicated lots of buyers were waiting for lower prices, and sometimes that's quite bullish.  But there are also times when buyers trip over themselves for a day, only to find that everyone who wanted to buy got in on that same day, and there are not enough buyers left after that.  As noted, the upcoming sessions are going to tell us which instance this was.  For the moment, I'm still leaning bearish on the bigger picture.  Trade safe.

SPX and INDU: Near-term Target Capture and Reverse Keeps Bears in the Game

In the prior update, we expected SPX to rally up to 2450-55 and reverse lower (technically this prediction predated the update by a day, since I mentioned it on Thursday morning in our forums).  On Friday, that's what the market did.  It looks as good as it can for bears right now, and their near-term stop levels remain clear.  In addition, the daily bar on SPX (not shown) typically hints at some degree of downside follow-through.

I'm reading the low at 2436 as a b-wave, but it's not impossible for this to be part of a triangle.  Triangles often have complex waves such as double-zigzags that can throw you off -- so just in case, I've drawn up a chart with one alternate near-term bullish bear count:

INDU has, so far, been treating the blue line as resistance.  Which is how bears would like it to remain, of course:

In conclusion, there's no material change from the past few updates.  Trade safe.

SPX Update: No Material Change

There's no change since the prior update, so we're just going to look at SPX and its near-term options.

The first thing that jumps out on the chart is that we have a decline from SPX 2454.77 that looks like it is probably incomplete.  If we presume that to be correct, then there are two main options:

1.  The low at SPX 2436 is a b-wave, which would see us rally toward 50-54 before reversing back down to break that low (including the potential for several days of up/down/up/down around those two extremes).

2.  SPX heads lower more directly, thus suggesting either a micro bear nest lower, or an ending diagonal nearing completion.  A rapid and sustained breakdown would suggest the former.

The third option, of course is that neither of these options are correct.  And that's always possible too, so I've discussed that on the chart below:

In conclusion, my near-term preference is for one of the two numbered options discussed above the chart, both of which imply an incomplete near-term decline.  If bulls pull out a near-term surprise here, then things will become a little more challenging, at least initially  And of course there's Fed Speak today, so that should keep everyone on their toes (except for Janet, who has no toes per Federal regulations).  Trade safe.

SPX and INDU: Bulls Defend Their Zone -- but Will It Hold?

In the last update, I talked about the potential ABC decline and how bulls needed to hold the zone around Friday's low to make something of that potential.  I concluded the update with the following thoughts:

if bulls are going to stick-save this monster, they probably have to do so now.  It looks probable that they will ultimately fail in that endeavor, and thus that bears still have the ball -- but nevertheless, it's a good area for bears to avoid complacency.

Yesterday, the bulls read the update, slapped their bull foreheads, and launched the rally they needed, thus doing their best to make everyone believe there was a complete ABC decline in place.  Despite that, I'm still inclined to lean toward the bears.  Either way, the best thing about this pattern now is that we have a VERY clear confirmation level to watch, along with targets that should be fairly reliable.  This is all discussed in detail on the SPX chart: 

INDU did manage the test of the blue trend line from the underside:

In conclusion, bears haven't had much luck with bear nests in recent years, but this time just might be different.  Whether it is or not, at least there is a very clear confirmation level for bears to watch (and for bulls to defend), and probable targets to aim for if/when that level fails.  Trade safe.

SPX, INDU, RUT: Next Downside Targets Captured

So here's where things stand:  SPX has formed a perfect "potential ABC" down, but bulls will have to hold the zone around Friday's low to make something of that potential.  I'm inclined to think this probably is NOT an ABC, just an ABC look-alike -- so that zone probably won't hold, but it's not impossible for SPX to bounce around for a while in the meantime.  It's also not impossible that my inclination is wrong, of course, so bears shouldn't get complacent.

In the "victory lap" category, the decline in SPX has now overlapped both red 1 and red i, which has validated my labeling of the smaller red 5 -- significant because this was correctly predicted (and correctly targeted) while the rally was still underway:

INDU has nearly reached its next downside target... and, at this exact moment, it looks like it's probably going to end up being either a case of either "close enough" or "we'll shoot past it."

RUT has captured and exceeded its first downside target, which was the "or ii of 5" on the chart below.  All current indications suggest it's headed toward the blue (iv) target at the bottom of the megaphone, but it hasn't QUITE invalidated "or ii" just yet, though it's very close.

In conclusion, if bulls are going to stick-save this monster, they probably have to do so now.  It looks probable that they will ultimately fail in that endeavor, and thus that bears still have the ball -- but nevertheless, it's a good area for bears to avoid complacency.  Trade safe.

SPX, INDU, NDX, BKX: A Bad Day for Bulls

Here's a sentence I haven't typed in a long time:  Yesterday was an ugly day for bulls.  Amazingly, it's starting to look increasingly likely that the "Bull 5" peak, which we began anticipating well in advance (at SPX 2489-2500, and north of 22,000 for INDU) may indeed have been correct.

SPX got smacked down by my first resistance level like a mosquito at a WWE match.  It does have a major inflection zone approaching on the radar, so that will be the next test for bears (if we get there, of course):

INDU has continued turning, and is now under first support, with the 21,500 target (mentioned last update) on the radar:

NDX threw a minor curveball and appears to have formed a running flat, which caused it to turn south slightly below its ideal target zone:

And BKX -- remember BKX?  Several months before Dennis Gartman decided to "stake his reputation" on the end of the bull market, we were predicting that BKX was already in the midst of a meaningful correction.  Of course, it still has a ways to go, so it's still technically possible I could have to eat crow on this call -- but it looks "as good as it gets" so far, anyway:

In conclusion, bears fired a serious warning shot yesterday, and as I mentioned a few updates back, if 5 is indeed complete, then this decline is just getting warmed up.  That said, we can't entirely count bulls out yet, but things do look more promising for bears than they have in a long time.  Trade safe.

SPX, NDX, INDU Updates: No Suprise

Last update discussed some pending resistance zones, as well as what we might expect if those zones were breached.  For NDX, I wrote:

We'll start with NDX, which tagged its first upside resistance area on Friday, and will enter into no-man's land if it clears that zone.  Next meaningful resistance isn't until the mid-point of the previous range

NDX cleared first resistance and then sailed, virtually unabated, into a direct tag of the second resistance zone -- a distance of more than 70 points.  Hopefully bears were well clear of that rally, in light of the warnings on Friday and Monday:

SPX hasn't moved quite as far into its resistance zone, but is presently back inside the old black channel:

INDU has continued its bounce from the blue support line:

In conclusion, bulls turned everything right where they needed to and thus have kept their hopes alive for the time being.  On the bright side for bears, the wave pattern gave ample warning of a pending bounce, and confirmation that the bounce would continue, which allowed bears to get free with some decent profits.  I'm hesitant to advise much here, because this pattern is now firmly into "could go either way" territory -- but if one is bearishly inclined, retests of the zones near the ATHs would entail the lowest risk, at least in terms of stop levels.  Trade safe.

SPX, INDU, NDX: Decline Halted (so far) at the Noted Inflection Point

Last update noted that it was possible the decline was complete, and that we were in an inflection zone (inflection zones are areas that represent potentially-complete waveforms, and thus higher probability reversal zones).  I concluded the prior update with:

In conclusion, bears have had a nice week, and should take care not to screw that up.  INDU has tagged support and NDX is sitting in an ABC inflection zone, and it's not unusual for such inflection zones to generate short term bounces even if the prevailing trend is still down.

We did indeed see a bounce on Friday, and that bounce looked impulsive, which suggests further upside coming today.  How much further remains to be seen, but we'll be watching how the market reacts to its upside inflection zones.

We'll start with NDX, which tagged its first upside resistance area on Friday, and will enter into no-man's land if it clears that zone.  Next meaningful resistance isn't until the mid-point of the previous range, although there is some minor resistance near 5880.

SPX's pattern allows us to generate a next upside target/inflection zone:

And finally, INDU is still testing its first support zone, and (as warned), could still bounce from that zone.  Keep in mind that INDU has yet to overlap any bearish confirmation levels:

The worst news for bears is that Dennis Gartman turned bearish on Friday, to the point that he is "staking his reputation" on the bull market having ended.  Gartman seems to have a knack for turning bearish at bottoms and bullish at tops... which sometimes makes one wonder how guys like him get constant national press coverage, while little independent guys like me (and others) often spot tops coming well in advance (while these national guys are still bullish), then warn (correctly) that a bounce is imminent while the national guys turn bearish.  Kinda makes one wonder how/why these national guys got so famous to begin with.  If it's still in vogue to blame George W. Bush for everything, then we can safely assume it's all somehow his fault.

In conclusion, bears would like to see a simple C wave today and/or tomorrow (the apparent A/1 was on Friday).  If the rally goes a wave farther and develops into a five-wave structure, then bulls and bears will know that we'll likely see at least one more large wave up after that.  Trade safe.

SPX, NDX, INDU: Downside Targets Captured; Next Levels to Watch

Well, it's been a good week for traders, as NDX, INDU, and SPX have all captured their downside targets (right on the heels of capturing their upside targets, of course).  The question now is whether the decline will continue, or if it's complete/nearing completion.  While we can't answer that with certainty in the market's present position, we do have a few signals/levels to watch heading forward.  Let's start with NDX:

SPX is in a very similar position:

In the bigger view, INDU has reached the blue trend line, and this represents an inflection zone.  Bulls are going to attempt to defend this zone, so bears should be on alert for bounces.  And until red iii is overlapped, we can't be certain that red v is finished.

In conclusion, bears have had a nice week, and should take care not to screw that up.  INDU has tagged support and NDX is sitting in an ABC inflection zone, and it's not unusual for such inflection zones to generate short term bounces even if the prevailing trend is still down.  To the upside, bulls need to sustain a breakout from the crash channel, and we have a resistance zone to watch at the dashed red pivot line on NDX and SPX.  Those signals (or the lack thereof!) should provide our next clues, and hopefully keep us pointed in the right direction  Trade safe.

SPX and NDX Capture Upside Targets and Reverse

Recent sessions have been a win for readers, as first INDU captured its upside target, then SPX and NDX captured theirs -- and more importantly, all have since reversed.  Lets look at NDX first, since this has been the market I've been advising bears to take advantage of (last update I even mentioned it as "bears' best hope for another leg down.")

NDX, as it turns out, perfectly captured the 2/B target zone (5960-80) from July 17:

I think some folks were having trouble envisioning how SPX could capture my preferred target zone and reverse, but that's exactly what it did:

And finally, it's a bit too soon to tell if INDU will fail its second target zone, but it does look like it probably at least wants to test the blue trend line first.  It's also worth considering that it is at least possible that the whole rally here is done for the time being, because there are enough waves in place for a completed fifth, if that's what it wants:

In conclusion, recent sessions have been "as good as it gets" for readers, with target captures across the board, as well as the anticipated reversals.  For the near-term, at least, we're now looking for lower prices.  If those declines become larger impulses, then we'll be able to more seriously consider that larger fifth waves may indeed have completed, and can then hold out some measure of hope for the potential of significant declines, which could stretch far beyond the first downside target zones.  Trade safe.

INDU and SPX: Zzzzzzzz...

There's no real change since last update.  INDU has continued rallying like they're going to stop selling large caps soon, prompting everyone to "get in while they can."  This fits with my (unpopular) theory that INDU is within an extended fifth wave -- extended fifths tend to be pretty relentless.  Until they end, at which point they reverse just as relentlessly.  Then they bounce just as relentlessly, because for a brief moment, everyone is convinced they just saw the buying opportunity of the century... but the bounce stalls at the retest of the prior high, and they then collapse even farther and faster. 

But I'm getting ahead of myself here, because we're still in the "relentless rally" stage (obviously), and INDU has continued to lunge toward Target 2.  There's still nothing to add since the comment of August 2 (or, really, since July 14):

SPX has continued chopping anyone who's been bold enough to trade this mess into tiny bits (which it has apparently been feeding to INDU):

NDX is not shown, but it looks like it might keep jumping around in a range as well.  It also still looks like the bears' best hope for another leg down, so I still suspect that if we get a decent bounce toward NDX's ATH, it's not a terrible selling op with a tight stop against the zone just north of the ATH. 

In conclusion, there's nothing to add to the last few updates.  Most markets have been making chop suey out of both bull and bear short-term traders, which is what I was worried they would do, which is why I haven't been giving much in the way of near-term projections lately (I'd rather not give a projection if there's nothing even remotely clear to project -- otherwise, it gives people the impression that something is much more tradeable than it actually is).  Beyond that, there's not much else that's fit to print just yet.  In time, though, there will be.  Until then, patience is still the order of the day.  Trade safe.

SPX, INDU, RUT: Market Fracture Continues

INDU has continued its relentless rally, it's now through Target 1 and headed toward T2.  Meanwhile, the rest of the market has been about as orderly as a preschool fire drill.  Everything seems to want to do its own thing, with RUT dropping straight down as INDU rallies straight up -- while BKX, SPX, et al, have been range trading.  I haven't seen a market this uncertain of its identity in a long time, and I still feel that suggests we're getting close to unraveling that larger fourth wave, because (as I've mentioned before), it suggests that there isn't enough liquidity around to rally everything at once.

And further, since INDU is rallying while RUT is falling, it implies there's been at least a near-term "risk off" mentality prevailing.

I don't feel like I can be a huge help on RUT at this exact moment, because this is a very unusual pattern, but folks have been asking for an update, so here it is.  It is possible 5 completed at its "minimum requirement," as discussed on July 26:

SPX is either an ultra-rare triple zigzag higher for a bearish wave 2/b (this has to be considered the underdog, simply because it's such a rare pattern), or it's not done heading higher (has to be the favorite, for that same reason):

In conclusion, I haven't seen a market this confused since the last time I attended an Andy Warhol auction.  But -- as I discussed on July 28 and 31 -- it still appears that some markets have further upside left, while bears may have seized, or be close to seizing, some degree of control in others.  Trade safe.

SPX, INDU, NDX: A Few Random Thoughts About Countertrend Trading

I'll get to the random thoughts mentioned in the title after the SPX chart.  But first, INDU is in the process of capturing its first target from July 14, but has given no signs (so far, anyway) that it's going to stop there, so Target 2 stays on the table unless/until we see an impulsive reversal:

Bulls have continued holding their key price level in SPX:

NDX still looks like the bears' best hope at the moment... but -- and sometimes I assume this type of thing goes without saying -- I would advise only fantastic entries if one is bearishly inclined. 

Bears need to realize that the trend is still up, and has been for a long time, so they are (obviously) trading against the prevailing trend -- and countertrend traders do NOT get the benefit of recovering from marginal entries.  When one is trading with the trend, the market will eventually bail out every entry, no matter how bad -- but this is not the case for a countertrend trader.  Countertrend traders can be left stranded for weeks, months, years... or even forever (if anyone is dumb and/or stubborn enough to hold a losing position through that level of drawdown, anyway). 

Keep all that in mind whenever we talk about bear options.  Until we actually enter a bona-fide bear market, bears have to stay twice as smart, twice as nimble, and twice as discerning about their entries as bulls.

For an example of what I'm talking about, look at the SPX chart above.  Back in June, somebody was buying at 2453.  That was a horrible entry, and the market immediately reversed lower.  If they were decent traders, they probably wouldn't have been buying that level in the first place, so we'll assume they were stubborn enough to continue holding through 50 points of drawdown.  Nevertheless, despite their awful entry and their ill-advised stubborn approach, because they were trading with the trend, the market eventually rallied back up past their entry and bailed them out with a profit. 

Eventually, that will change, and bulls will be punished for such actions.  There's a reason for the old adage: "Don't confuse brains with a bull market."  But, really, that's not any of our concern -- our concern is protecting and growing our own capital, not wasting energy being bitter toward bad traders who may be profiting despite themselves.  So, all that should matter to us is our own actions, and our own awareness of what's smart for our accounts.  And it's smart to know the prevailing trend, and thus know whether you have a wide margin of error, or a very narrow margin of error -- and then to behave accordingly.

In conclusion, INDU has captured T1 and may be heading toward T2.  SPX has held the key bull level so far.  NDX looks like a market where bears may get a chance, but if it sustains a break over the 5933 level, then bears are probably best off waiting for a much better entry, in which case (in the event of a sustained breakout) that chance may come near the "or 2/B" level.  Trade safe.