Sunday, November 28, 2021

SPX, INDU, VIX, NYUD: No Surprises So Far, But Caution Anyway

On Monday, we talked about the "market almanac" for Thanksgiving week traditionally being bullish (not this year!), but the market is dynamic, and by Wednesday, we had this warning:

Bigger picture, SPX came within spitting distance of the standing 4750 target: And that, likewise, contributes to the "easy money may be over" sentiment, as that's close enough to the target zone that an alternate count of ALL OF 5 as complete at least should be kept in mind.

Then on cue, Friday turned into a complete rout, with VIX spiking more than 50%, the 4th largest one-day gain since 1990:

This is obviously an extreme reading from VIX, and normally extreme readings lead to snap-backs, temporary or otherwise.

NYUD is also interesting here -- we can see that similar readings in the past tend to be followed by a bounce.  Now, the bounce that follows the extreme is not always the "final" low (see: Sept. 2020), but it has led directly to new highs several times:

Moving on to the price charts:  On Wednesday, we talked about how it's common (but not required) for Wave 4 to return to the price territory of Wave iv, and Friday put us directly into that price territory:

So, beyond the swiftness of Friday's drop, there wasn't anything particularly surprising about it, and I didn't even need to move the second "bull: 4?" label.  That said, again, as noted Wednesday, we are into trickier territory with this market now, and ALL OF 5 complete at the all-time-high still can't be ruled out.  

INDU (next chart) contributes its own warning to the mix: 

Finally, the long-term SPX chart:

In conclusion, the fourth wave for SPX is still on the table, but as I mentioned on Wednesday, things are a little trickier now, and we can't rule out ALL OF 5 having already completed.  Even if SPX manages to make a new high, that will probably be the fifth wave, and (barring an extension) is thus reasonably likely to be followed by a correction (or worse) anyway.  If INDU makes a new high too, then things might get more bullish again, and (were that to happen) then we could consider fifth wave extensions and ending diagonals -- but for now, we appear to be in territory where a healthy dose of bull caution remains in order.  Trade safe.

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