Wednesday, February 24, 2021

SPX, INDU, TLT: Easy Trade, Complex Pattern

While parts of this have been easy (for example, yesterday declined to and bounced from the 3800-10 support zone), from a pure pattern perspective, this has become one of the trickier markets we've seen in a while.  

First, the simple part:  SPX found support right at the blue support line discussed in the prior update:

Now the more complex part:  Last update discussed options of an ending diagonal vs. a bear nest.  The ending diagonal is off the table, but the market has left open the option of a WXY, as discussed below:

While SPX has been declining (in as choppy a fashion as it could muster), INDU has been grinding sideways, and has yet to fall through its recent breakout:

I also want to call attention to a potential "canary in the coal mine" in the form of TLT.  If bulls can't right the ship in TLT, it's going to start to pressure other markets, including stocks.  

In conclusion, SPX found support right where it should have, making that last trade easy -- but the next trade isn't crystal clear just yet, as SPX has (so far) formed just a three wave bounce.  This makes the zone near yesterday's high something of an inflection (it could move a little higher and remain a three, but not too much higher, or it will start to look impulsive), and keeping both counts discussed in the second chart on the table as of this instant.  Trade safe.

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