Monday, November 4, 2019

SPX and INDU Updates

Last update, we discussed the recent expanded flat and noted that the market could make it more complex if it wants, but it became apparent shortly after the open that the more complex flat was less likely, and I mentioned that on the forum.

On October 28, I wrote:

Let's see how the market reacts over the coming sessions -- but again, do keep in mind that if this pattern is simple and straightforward (the pattern shown in the first chart), then it is very bullish over the intermediate term. It will take a curveball from the market to get bears back in the game (for example: a b-wave high, which would be temporary, or an ending diagonal). Right now, it looks like it might be the straightforward bull option, but we'll track it as it unfolds.

And in the prior update, I reiterated:

But my instinct remains that the market has done enough goofing around over the past two years, so I suspect that once it clears this whipsaw zone, we'll see a solid trending rally. I'm not married to that, so will watch for other signals, but that's still my lean at the moment.

So far, there's been nothing from the market to call that instinct into question, so until we see an impulsive decline, I think bears should remain guarded.  Now, it wouldn't be unusual to see a sideways/down move at some point to test the breakout, but long-term, bears really have only one option, which is for an ending diagonal... and at the moment, that looks like an underdog, so we'll treat it that way unless/until the market gives us better reason not to.

Bigger picture, we're going to assume this count until proven otherwise -- though do keep in mind that bears CAN still get an intermediate b-wave high and c-wave decline, which would alter this somewhat; but, of course, if that happens, we should have plenty of warning.

Near-term, SPX encountered some resistance at the thin black channel line, but looks poised to leapfrog over it this morning.  The next meaningful resistance zone is around the thick black line, currently crossing near the 3100ish zone.  That's where we'll be watching for signals of either a b-wave high, or an ending diagonal.  If the market sustains a breakout there, then bear chances will continue diminishing.

In conclusion, the market still hasn't cleared the recent breakout zone, particularly in INDU, so all hope is not yet lost for bears -- but given SPX's behavior, they have to be viewed as the underdogs at the moment.  If things change, we should have early warning in the form of an impulsive decline, so there's no need to front-run and bears should probably maintain a guarded stance unless/until that occurs.  Trade safe.

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