Friday, August 12, 2022

SPX and NYA: Big Question Finally Answered

Since last update, SPX captured and exceeded the 4200-35 extension target, which suggests that the current rally is a high-degree second wave that is correcting the entire bear market to date.  This in turn allows us to form some educated projections about the length of the next leg down.  

What it does not do (yet) is tell us the form that the current Wave 2 rally will take.  The rally is presently three waves up, which is "enough" structure for it to complete soon -- however, it is entirely possible that we're only witnessing a portion of a still larger fractal, meaning that the three up could become five up, which would then mark a larger Wave A of 2, to be followed by B-down and a similar-sized C up.  As noted previously, bears might want to await an impulsive turn (or otherwise low-risk entry) for this reason.

NYA has captured its "textbook" target:

The SPX trend line chart shows that SPX is currently whipping and sawing around the red horizontal; how it ultimately resolves here may offer some near-term clues.

In conclusion, the good news is that we now have a definitive answer to the "is this wave 2 or wave 4?" question, and we're able to form some downside projections for the next wave based on that.  What is not yet clear, however, is whether the wave is closing in on completion or not.  Also, if you're a bull, you take this as a signal that the bear market is over.  I'm not a bull here, but just throwing it out there for those who are and were waiting for a clear signal.  Trade safe.

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