Friday, March 27, 2020

COMPQ and SPX: Important Inflection Zone

Last update noted that all downside targets had been captured, and the market has rallied since.  I spent literally all night staring at charts, and I have to say, the recent swing low in SPX may be the most difficult pattern (to interpret) that I've EVER seen, in more than 20 years of charting.

Although I spent all night charting, I didn't get much done that I want to publish publicly, and the only definitive conclusion I came to was that this is an upside inflection zone (which we actually knew yesterday and discussed at length in the forums) as best illustrated in COMPQ:

It would be normal for the market to react to such a strong inflection with at least a near-term sell off.  From there, we'll find out if bulls have what it takes to turn that first rally leg into 1/A up and then bounce higher in 3/C up, or if that was "all she wrote" for the bounce.

But I found this next bit of information interesting.  This comes from SentimenTrader.  I make no claims to the veracity of the data, and draw no conclusions from this data, but it is interesting to know:

Finally, near-term, SPX appears due at least a correction, if not more:

In conclusion, we are at a big-picture inflection point.  Many markets reached important long-term resistance zones yesterday.  Bulls must reclaim those zones to feel confident in a meaningful bottom.  The normal reaction of the market to such zones is to sell off... so we'll see if bulls can find support on the way down, or if that was the end of a larger Wave 4 bounce (meaning new lows on the horizon).  We'll discuss that in more detail in the next update if it's appropriate to do so.  Incidentally, if bulls can claim and hold the inflection zone TODAY, then that would be a good sign for them.  Trade safe.

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