Friday, June 12, 2020

SPX Update: Nothing, But Loudly

(First off, let me apologize for the difficulty I've had on occasion of sticking to the 3:30 A.M. market schedule.  As most readers know, I live in Hawaii, and that means the market here closes at roughly the same relative time that it opens on the East Coast (it closes at 10:00 A.M. here).  So I typically set my alarm around 2:30 A.M., but if, upon awakening, I find the market is particularly active, I often end up needing to manage my own positions while at the same time trying to complete the update.)

As crazy as yesterday may have seemed, from a technical standpoint, there was no key overlap.  From a practical standpoint, the market turned at the "or (1)" inflection, which tempts me to make that the preferred count.

The challenge from an objective standpoint, though, is three-fold:

1.  The decline did not overlap any key levels.
2.  The decline did not break the red uptrend (or even test it; it bounced prior to hitting the line).
3.  The decline is only three waves so far and not yet impulsive.

So, add all that up, and it means that although bears had an exciting day yesterday, the market reserves the right to end it at that.

So we're going to wait to see if bears can break the red uptrend with a new low, and/or create some key overlap, before shifting the preferred count.  If that happens, we'll have some interesting cases to look at, including the possibility that:

1.  The long-anticipated "double retrace" has begun, to roughly retest the zone near the March low
2.  The recent rally was a truncated fifth to end the entire wave, with a bear market on the way

But first things first.

(Addendum:  A reader asked me to clarify why the decline is three waves and not an impulse, so I'm adding this late (and crude) chart.  We have to remember that the A and C subwaves of an ABC ARE impulsive, but three waves does not make a LARGER impulse.  Chart showing how the decline is three down shown below -- if today's rally is a fourth wave, then red (C) is actually red (3) -- hence, another new low would make the decline off this week's high into an impulsive decline):

Now, if the decline from this week's high is to become impulsive, then today's bounce would be part of a fourth wave and likely return to make new lows either later in today's session, or on Monday.  If that occurs, then we should probably anticipate a larger trend change underway.  Trade safe.

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