Wednesday, January 23, 2019

SPX Update: First Glimmer of Near-Term Hope for Bears Since December

Yesterday saw SPX decline significantly intraday, then, during the last 20 minutes of the session, it bounced as if there would never be another stock issued ("Buy your stocks now, boy -- they ain't makin' any more, don't cha know!").

For the past few weeks, I've admonished bears to await an impulsive decline before getting too worried about being short, and we now have what MAY be an impulsive decline.  I say "may" because the decline looks impulsive on the cash chart, but looks corrective on the e-mini futures chart.  For that reason, I can't say with certainty that the decline was definitely impulsive, and for that reason, I would advise bears to await a low-risk entry before attempting to act against it.

But even so, bears have at least avoided randomly shorting this rally the whole way up, and even if this seemingly-impulsive decline ends up blowing up, bears who maintained discipline are way ahead of people who have already shorted and been stopped a dozen times.

A big part of successful trading is learning how to pick your battles.

So, for the point of analysis, we're going to assume yesterday's decline was a completed impulse (wave A or 1 down), and that the bounce off 2617 is the start of wave B or 2 up.  We will thus expect wave C or 3 down to follow.  In the case of a C-wave down, that should be at least equal in length to wave A, which was 58 points.

Do keep in mind that if this downward correction is ONLY going to be an ABC, then it will make new highs above 2676 after wave C down completes.  We'll worry about that if/when we get there.

Bigger picture, we can see a whipsaw at the neckline of the prior topping pattern.  IF bears can't get back above that line quickly, this can sometimes be a near-term bearish signal.

NOTE TYPO:  2517 should be "2617"

In conclusion, this is the first glimmer of hope bears have had for even a near-term correction since December.  Bulls would need to sustain a breakout over 2676 to negate that.  Trade safe.

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