Wednesday, October 17, 2018

SPX and BKX: No Material Change

In Monday's update, I warned bears several times to tread carefully and that a second wave bounce was possible.  Yesterday those warnings paid off, as the market uncoiled itself relentlessly higher.  We have some interesting patterns in development now, with the decline from the all-time high having an (apparent) micro extended fifth, and the current rally likewise having an (apparent) micro extended fifth.

This is the potential recipe for some sharp up and down action over the coming sessions.  Given what's in the charts right now, this would ultimately be expected to resolve lower over the longer-term.  Narrowing down the timing will be helped by seeing if the market forms an impulsive rally or an ABC rally for this current leg.  Right now, it's 3 waves up (ABC), and may even need higher prices before being a COMPLETE ABC.

We'll track that as it unfolds.

In the meantime, BKX is peeking over the edge of a cliff.  If bulls can miraculously stick-save this, then the picture could change, but as it sits, it is what it is.

On the SPX chart, the red "a?" and "b?" should be considered as speculative at the moment and will probably need to be adjusted later.

In conclusion, the market seems to have confirmed Monday's read that wave (1) down was complete.  This means that if/when (we're currently assuming "when") there's a significant breakdown at last week's low, we could get a serious and significant decline.  I'd also like to throw out there that the bull count isn't entirely out of the question -- but we're going to continue to treat it as the underdog for the time being.  Near-term, we will likely continue to see sharp price action.  There are now two micro extended fifths on the board, which could mean at least two double-retraces pending.  Again, we'll track that as it unfolds.  Trade safe.

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