Wednesday, October 30, 2019

SPX and INDU: Fed Up? Or Fed Down?

In the last update, we expected SPX was headed to a new all-time high, the question remains whether it can hold that breakout.  Since then, the market has consolidated sideways and appears to be in a holding pattern, waiting for the Fed announcement today.

Since the market's gone nowhere, there's not much to add, though it's worth noting that INDU is still below its all-time high:

With SPX above its all-time high, it appears the most bears could hope for at this stage would be a b-wave high that returns to the 2790+/- zone in wave c of an expanded flat (before heading higher again).  Given the deep retrace in September, I wouldn't rule that option out yet.

This is either a very bullish nest that's not even halfway through the rally off the August lows, or it's the b-wave option mentioned above, and we get a sharp, swift, scary decline toward 2790 before the next rally leg begins in earnest.

The next few sessions could tell us which of those options is unfolding.

In conclusion, bears do still have one (temporary) option for a b-wave high (as discussed above), and we can't rule that out yet.  The market is expecting another rate cut, and how the market reacts to the Fed announcement will likely set the tone for the next few weeks, and (in the case of the most bullish option) possibly the next few months or longer.  Trade safe.

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