Friday, December 21, 2018

SPX Update: Next Downside Target Captured

For the past couple months, I've remained consistently bearish on the bigger picture, with our only concerns being the potential of near-term rallies that have all been expected to resolve bearishly (and have).  At yesterday's low, SPX had dropped more than 500 points off its all-time high, which it reached just a little over two months ago.

The funny thing to me is that, according to pundits, "a 20% decline" constitutes a bear market.  Which means that, according to pundits, we're not in a bear market just yet.

Pundits are silly.

SPX captured and exceeded its first downside target, and while it managed to hold black support, it's hard to conceive of a pattern where yesterday marks "the final low" of this move.

It's worth noting that, in my mind, the fact that black support held indicates that this is STILL "an orderly decline."  Meaning we haven't seen anything approaching "panic selling" and a washout yet.  If this wave is all the nested bear that it appears to be, incredibly, we may only just now be approaching the third wave "point of recognition," where the masses finally get wise to what we've known for weeks (and for hundreds of points):  Specifically, that this isn't just another run of the mill short-lived "correction," but something more significant.

What I'd actually love to see here is a complex fourth, or another nested second wave to give bulls at least a little bit of hope, but SPX must reclaim the red channel on the chart above or the decline could accelerate.

In conclusion, the intermediate-term trend still remains down, and at present, with SPX beneath red and inside the green waterfall channel, the trend at all time frames is down.  Maybe bulls will put something together for another short-term reprieve, although we can't count on that -- but if they do, it should simply offer bears another chance to reload.

p.s.-- Since I probably won't publish an update on Christmas Eve, let me take this opportunity to wish everyone a Merry Christmas!  (and/or "Happy Holidays!" if you prefer)  Five years ago, I penned a deeply-personal article just before Christmas, and many readers over the years have written to let me know how much they enjoyed the piece, so it's become something of a tradition to link to it in my final post prior to the Christmas break, for those interested:  A Christmas Story: Reflection on What Matters 

Trade safe, and be safe, this holiday.

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