Friday, February 21, 2020

SPX and INDU Updates: C-wave After All?

Well, this is an interesting conundrum.  In the recent past, we've been watching for the possiibility of a B-wave high, to be followed by a C-wave decline, and the market has repeatedly flirted with the idea.  On Wednesday, the market briefly broke above the resistance zone, but it failed to hold that breakout, and collapsed sensationally on Thursday.  It then recovered a good chunk of that decline into the close.

Amazingly, despite that steep drop, the decline is only three waves down (so far) in SPX, and TWO sets of three-wave declines in INDU (a correction known as a WXY is two sets of ABCs strung together by an intervening three-wave rally) -- so while things look somewhat promising for the C-wave decline, we (as yet) still have no impulsive (five-wave) turn to confirm that idea.

In INDU, we can clearly see two three-wave declines:

In conclusion, if SPX and INDU can form new lows, we'll have our first early hint that perhaps the large C-wave will materialize after all.  Yesterday's low does mark something of an inflection point, though, so if the markets cannot make a new low, we would have to entertain the possibility of a completed correction at yesterday's low.  Trade safe.

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