Monday, October 15, 2018

SPX and INDU Updates: Inflection Point

While studying charts this weekend, I discovered a very interesting support confluence, which INDU tagged perfectly on last week's decline.  Coupled with the price action on Friday, this tells us that bears probably want to be cautious here -- because all that means this is an inflection point where the market could reverse higher.

Long-term, this is something of a no-man's land... if the larger wave c of B ended, then we'd ultimately expect the 2018 lows broken -- but that doesn't mean the market can't bounce around for several weeks first.  Especially if last week's decline had an extended fifth wave (which I believe it did) and extended fifths are notorious for being followed by complex corrections.

Near-term, if this is part of a larger expanded flat C wave down, then wave (1) of C may have completed last week.  I've also added a bull count that we can't rule out (an ending diagonal for c of the larger B):

In conclusion, unless and until INDU/SPX can sustain breakdowns of their noted support zones, I think bears want to tread carefully.  If wave (1) down has completed, then a vicious 2nd wave bounce may be forthcoming.  Of course, if SPX instead sustains a breakdown, we'd have to presume the current wave is still unfolding.  Fortunately, we do seem to have a relatively clear dividing line to work with.  Trade safe.

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