Wednesday, January 10, 2018

INDU Update: INDU Captures Next Target and Asks, "Does 2018 Rhyme with 1987?"

It's been an interesting year so far.  SPX has not notched 6 consecutive records this year, something it hasn't done since 1964.  But what I hoped to get at in this article is this:  There is some present similarity to 1987 -- a year which saw a crash, but saw that crash come within the context of a larger bull market.  Most interestingly, the blue chips have created the perfect setup for a very similar situation this year. 

And it might not be too far off, relatively speaking.

Let's focus on just one chart today, but we need to caveat that we do not yet have impulsive declines in any major index, so this must be considered as purely speculative until we do.  As we've seen so many times already, fifth wave extensions love to tack on more fifth wave extensions, so we need to see an impulsive decline to finally signal at least a temporary cap to that trend.

So for right now, let's just mull over the possibilities in the chart below:

If you're wondering where the captured target came from, it was published on 12/29 via the chart below:

Referring back to the first chart (weekly), there would be a certain beauty to an extended fifth wave and a double retrace here, inasmuch as the textbook retrace would almost perfectly back-test the breakout over the long-term trend channel.  That gives the potential some harmony in my mind, and the fact that it fits the wave count to the letter makes me think there's a real possibility for this outcome to occur.

Again, I don't want to get too excited until we see an impulsive decline, but it sure is tantalizing to consider.

Back above the all-time high, of course, and bear possibilities for the first impulsive decline will be dead for the moment.  Amazingly, the last time I spotted an impulsive decline in SPX was back at the very end of November, so it's somewhat mind-boggling that we've gone this long without another one.  Do keep in mind that another new high here would rule out the options for an immediate impulsive decline, but would not entirely negate the potential of the larger correction.

In conclusion, we've reached a big inflection point with some significant bearish potential if (and I cannot overstress the "if/then" nature of this equation) the market forms an impulsive decline here.  For the moment, all we can do from a predictive standpoint is tread water while we await confirmation or negation.  Trade safe.

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