Friday, June 21, 2019

SPX and INDU: Blowout or Fakeout?

Well, the June rally pushed just a hair farther than we were hoping, and in so doing, makes my analytical life more difficult for the moment (you'll see what I mean).  It also knocked out a portion of the bear count, but not the entire bear count just yet.  One of the rules of Elliott Wave is that second waves cannot retrace more than 100% of first waves -- however, B waves CAN retrace more than 100% of A waves.  So the potential of June rally as c of B is still on the table for the moment.

There are two additional counts that we now have to consider as well.
  1. The most bullish count would be for the recent correction to have been a HIGHER DEGREE second wave.  This would make the rally from the December low to the May high a large first wave, the recent decline a second wave, and a huge third wave rally underway now, to ultimately run toward... (goes into coughing fit)… 3700 SPX.  I'm not sure I'm ready to get on board with that just yet, though.  So another option would be:
  2. That the most recent corrective decline was wave 4 of the rally since December, with the new all-time high (in SPX) being wave 5 of the rally since the December low.  That would mean that an even deeper correction would begin after wave 5 completes.

See what I mean about the market now making my analytical life difficult?

This is one time the charts aren't a huge help at this exact moment.  There's really nothing in them that gives either of the above reads a distinct edge -- so for the moment, I'm going to continue to give the most consideration to the idea of a B-wave high.  At least for now.  The caveat there is that in the event this IS a big bullish third wave, or even the smaller bullish fifth, it could push higher for a while if it wants.  Bears should choose their battles carefully.

SPX has formed an interesting larger channel:

In conclusion, this is a pretty major inflection point now, and the market has two options that will call for more correction, and one option that calls for a blowout rally higher.  Given the fundamentals, I'm having a hard time getting on board with the blowout rally just yet, so we'll see how things shake out over the next few sessions, and hopefully the options will begin to narrow a bit.  Trade safe.

No comments:

Post a Comment