Friday, August 20, 2021

SPX Captures Downside Target Zone

On August 4, I wrote:

[T]here are enough waves for a completed correction if the market wants, but I suspect the current correction may grow more complex, and thus we could see more chop before it's all over. That's not guaranteed, of course, as predicting complex corrections is far from an exact science -- so in the event it instead continues to rally, then we would watch the upper black trend line (on the near-term chart) as a potential upside pivot.

SPX never sustained a breakout over the black pivot, and I continued to publish a chart showing a move down below 4370 SPX.  That was actually a hard call to make on August 4, and remained a hard call to stick to (given that complex corrections are almost impossible to predict even in a normal market, and even more so in this Fed-driven market), but that prediction finally came to pass on Wednesday, with SPX capturing its downside target as shown:

Bigger picture, after capturing the 4480 upside target (originally from June 7), SPX reversed and found support at the red intermediate trendline:

Also, in the event the above-noted support zones break for more than an instant, it remains worth knowing that there are technically enough waves for a complete 5 of 5, if the market wants:

In conclusion, SPX captured its first downside target zone and bounced.  This is okay as long as that zone continues to hold, but in the event it sustains a breakdown at the noted support zones, then bulls might want to be extremely cautious and await an impulsive rally before getting too aggressive again, because if those qualifiers get met, then there's at least the possibility that 5 of 5 is complete.  Trade safe.

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