Monday, August 5, 2019

SPX and INDU Updates

Of all days for me to be having trouble with Stockcharts… I am unable to update the near-term charts, but did manage to pull the intermediate charts, which are more valuable today anyway.

Anyway, last update warned that the market was "on the edge" and concluded with:

The biggest challenge at this point is reconciling the decline as complete -- so maybe the simplest answer is that it's NOT complete yet. As I warn bears during uptrends: Await an impulsive turn -- and that advice now applies to bulls. This could easily turn into an even-uglier decline, with the 2900 SPX zone now on the radar -- and possibly much beyond. Bulls should await an impulsive rally before getting too committed.

This turned out to be a sound approach, and the expectation that further downside was pending was correct.

We're now getting very close to the intermediate uptrend channel on both INDU and SPX, and as last update noted, that level was likely to be tested once red support (chart below) was breached:

A similar picture in SPX:

In conclusion, when I was leaning bearish near the top, everyone thought I was nuts and that the market was breaking out forever.  I'm going to now warn the opposite:  While bulls SHOULD still await an impulsive rally, we ARE approaching intermediate support, so if one is getting bearish this late in the game, approach that emotion with extreme caution.

The pattern in ES (e-mini S&P futures) suggests a "bounce or break" shortly after the open.

If the market falls right through support, back tests it and gets rejected, then we should remain bearish and could see a continued waterfall.  But don't assume without question that that's what will happen -- pay close attention to the market's behavior around the upcoming support zone.  In any case, that represents the next inflection/challenge zone, so let's see how the market reacts.  Trade safe.

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