Monday, August 14, 2017

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.

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