Wednesday, October 28, 2020

SPX Update: Preferred Count Comes Through Shining

On October 14, I noted that we had our first impulsive decline since the September low, and that this signaled at least a near-term trend change, with further downside expected.  On October 23, I reiterated in clear language that "Bears Still Have the Ball," and sketched-in some 3/C target zones.  The first of those zones was captured on Monday, but it appears that was only the bottom of the micro third wave (see chart below).  Also note SPX bounced from black support back up to test the blue line from underneath:

Bigger picture... we're not quite here yet, and we'll take it as it comes, but here's something to at least be aware of -- starting with: if bears can sustain today's breakdown:

In conclusion, as we've seen so many times over the years, an impulsive decline arrived early to announce the change of trend, and the market has since responded.  We are now nearing a downside inflection zone, so we'll have to see how the market reacts to the break of the red base channel on the first chart.  If it's going to bounce, it would typically do so fairly soon after that break.  If it can't recover the base channel, though, then it may enter an acceleration channel and the speed of the decline could increase.  The next couple sessions will be important.  Trade safe.

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