Wednesday, January 29, 2020

SPX and INDU Updates

Last update thought that INDU would likely bounce shortly after the open in a fourth wave... but the market is getting close to challenging the idea that the current bounce is a fourth wave.

We looked at SPX's 50 DMA last update; here's INDU's:

Unlike INDU with its choppy pattern off the high, SPX looks like a more straightforward three wave structure, so far.  Bears were unable to sustain a break of the uptrend channel, which is the first step they need to stretch the correction farther.

It's worth noting that SPX almost-perfectly tagged a trend line I had highlighted earlier in the month (and have highlighted on and off for years, in fact), and so far, that trend line has held.

In conclusion, bears will probably need to stall the current rally fairly soon if they want to keep hope alive that the bounce is a micro fourth wave.  Even if there is overlap of the prior 1/A low, there will still be bear options for a more complex correction, so we'll take that as it comes.  Direct new highs (if they occur) will be disappointing to bears, but we were not anticipating this to be anything other than a correction to an ongoing bull wave (a fourth wave decline at the end of a larger third wave), so we'll see if bears can get more out of it or not -- but we shouldn't hold our breath too hard or get too upset if bears can't turn it here.  But we haven't overlapped anything yet (just trying to prepare bears mentally in case it happens!), so if bears can turn it here, then we may end up with a larger impulsive decline, and that would certainly help the bears for the next higher time frame and a larger correction.  Trade safe.

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