Tuesday, May 8, 2018

SPX Update -- and the Quantum Market

Science has discovered via quantum physics that, at its most basic known level, the Universe is not deterministic; it is probabilistic.  Particles appear to exist not so much as individual forms, but as a wave function.  This wave function represents the mathematical probability of where a particle could be, given its multiple possible states.  This wave function collapses upon the introduction of an outside observer.

Unlike objects in the macro world, which can be observed and tracked with precision, particles instead behave as a wave of potentialities.  I mention this because the stock market is often better-likened to the quantum world than to the macro world -- and it also appears to be probabilistic.  While a given pattern may work 8 or 9 times out of 10, there will always be a handful of times that it fails to perform as expected. 

Not that this has been a problem for us lately -- in fact, last update stated that "My first instinct is that yesterday's low [2612] will likely be broken to the downside in the coming sessions," which came to pass --  but it is nevertheless always important to remember that the market must be approached as a probabilistic equation.

On Thursday, when SPX was trading near 2598, I posted an alert in the forum that the market could potentially turn higher directly, and run all the way to 2683 -- which it has since done.  The second part of that equation now suggests that the low at 2594 is likely to be broken in the coming sessions.  (But again, these are only probabilities.)

In conclusion, SPX has completed the minimum requirements for the current (presumed) pattern, and thus the probabilities favor that it will reverse lower, to the tune of 114+ points, in the next few sessions.  If it instead sustains a breakout over 2718, we will give more consideration to the bull alternate.  Trade safe.

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