Monday, February 26, 2018

SPX and INDU: Radioactive Waste from Chernobyl

Last update, I mentioned:

...the near-term pattern has been more fun than a barrel of radioactive waste from Chernobyl, so I'm including a few notes on the S&P 500's (SPX) near-term pattern.

I've stared at this chart long enough to give myself a headache, but I still have a difficult time finding a count that suits the very beginning of this wave to my satisfaction.  My best guess is that it's a nested bearish 1-2 pattern off the 2754 high -- but if it continues to chop around (which it very well may), then it will be possible that the expected resolution lower would culminate with a c-wave instead of a third wave.

The "best guess" bear nest will be dead if 2755 is broken -- but on the bright side, the rally to 2747 was not at all unexpected, and ended directly inside the red target oval, so that much shouldn't have been terribly troublesome for bears. 

I also said that I suspected the near-term pattern would culminate with lower prices -- on that much, the jury is still out.  It's possible the pattern is a complex expanded flat, represented by black (B) and (C) on the chart below.  That pattern is by no means guaranteed, it's simply something to remain alert to.

The bigger picture INDU chart is materially unchanged.  Since the first day I published this chart (near the lows), red B/2 has been the "all roads lead to Rome" target, so we've suspected we were headed higher one way or another -- it may simply turn out that "higher" comes sooner rather than later.

In conclusion, there is the potential for the near-term pattern to get screwy again, so remain alert to the possibility of black (B) and (C) -- but that type of pattern is almost impossible to predict, so don't bet the farm on it.  The market may instead continue heading toward its B/2 target more or less unabated.   Trade safe.

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