Friday, April 3, 2020

SPX, COMPQ: Why I Haven't Joined the LONG-TERM Bear Camp Just Yet

The recent crash caught many people by surprise.  It did not catch us by surprise because the market (under Elliott Wave Theory) is something akin to a jigsaw puzzle, where once you have certain pieces of the puzzle in place, you can take a reasonable guess as to what the next piece might look like.

Back in January of 2019, I spotted a few pieces that didn't quite fit together as they should if the 2018 decline was to be counted as complete... which caused me to hypothesize what that might mean for the future (below, from January 7, 2019).

It took a little longer to play out (I often compress the time aspect of my projections, in order to work with available chart space), but it did play out very closely in terms of market behavior.

My recollection of the "unresolved" 2018 low is, in fact, the reason I immediately jumped from the smallish correction we were expecting, all the way to the extreme crash count (when all that had happened at THAT point was the first little wave off the all-time high exceeded my expectations in terms of velocity).

The decline was actually better-behaved in SPX and ran right to the Red C/4 on the chart -- and bounced (for 400+ points so far).

So now, here we are, with all initial downside targets captured.  Many people are insisting this is the beginning of a new, many-year-long bear market, and while I can completely understand WHY they believe that, I'm still not sold 100% on that belief.

Readers will recall that, about a month ago, before the crash had really gotten rolling, I noted that "C-wave" was sometimes said to stand for "Crash wave." C-waves are third waves, and bring all the power of a third wave to the table.  First or A waves are generally weak, and thus *rarely* function as crash waves.  Therefore, the strength of recent record-setting crash certainly argues for it indeed being a C-wave, and not a first or A wave.

I allow for the possibility that things will get worse, though, before they get better.  Because what I do remain undecided on is whether ALL OF C of 4 is complete.  I'm waiting to see JUST a little more out of the current wave structure before making that call (I'm sort of leaning toward ALL OF 4 being complete, but still not ready to commit yet).

Either way, I am pretty firmly in the camp that this is NOT going to be a 5-10 year bear market, and I think the chart below may help reveal exactly why I'm not sold on this being "the big one" JUST yet:

So, from a big picture standpoint, COMPQ most likely still needs a large fifth wave rally to pair with Blue Wave 1.  Sure, it's always possible that last little pop to all-time-highs was a deeply-compressed (5) -- hence the (ALL OF) alt. (5) label -- but that seems less likely.

Again, what we CAN see on the chart above is that Blue 4 could certainly run lower without creating any problems.  So the question remains whether the recent swing low marks ALL OF 4 or not.

(I've previously written about some of the fundamental triggers that could lead to new all-time highs, in a piece titled: Devil's Advocate.)

Switching gears from the very long-term to the near-term...

Near-term, SPX declined right into my first target zone from Wednesday's update, and has been bouncing since.  In fact, it's followed the blue projection lines as I had them drawn almost to a T in terms of price at the last three turns (I slid the lines over to the right a little for comparison sake).

Now, that said, there's a pattern in the futures market that has been bothering me since yesterday, so I'm not certain that ALL OF C (below) is complete -- so if 2447 breaks, we should be alert to the lower target zones.

The chart below has been quite valuable for the past few weeks, and I believe it still holds value:

In conclusion, SPX captured its first near-term target zone, and has been bouncing ever since -- so, if nothing else, the market is acknowledging that zone as an inflection.  Whether that will hold remains to be seen, and there is at least a possibility it will head toward the lower targets, so bulls aren't out of the woods just yet.  Beyond that, no change from last update, so please reread if needed.  Trade safe.

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