Wednesday, August 23, 2017

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.

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