Friday, October 21, 2022

SPX and TLT: TLT Captures April's Downside Target

Last update discussed my view that 3762 was a potentially-important inflection zone; since then, the market has held below that level, which keeps open the bearish possibility for 3762 to mark the top of a fourth wave.

Near-term, SPX did break down from the blue uptrend line on the chart below, but I still believe the lower black trend line is the more significant downside inflection:

Zooming in even further, and looking at the SPX24 chart (which combines the cash action with the overnight futures action), we see a scary-looking wedge developing.  These can be terminal patterns, in which case a bounce may be imminent, but they can also be nesting patterns -- so while a minor break and whipsaw of the lower line would be perfectly fine, bulls should be cautious if there's a sustained breakdown at lower black:

Bigger picture, I've outlined some potential targets, relevant only in the event the last high was ALL OF 4, though even at that, let's consider these as tentative right now, as the jury is still out on whether that high was a fourth wave, or just a bullish wind-up:

Finally, TLT has reached my "you're crazy for even suggesting that!" target of 91-94, published in April.  This is absolute carnage, which is why most people thought I was nuts for suggesting this:

In conclusion, the market is still trading below last update's inflection.  If bulls can break out above 3763, then bears should be very cautious for the immediate future; if they cannot, then perhaps that was ALL OF 4 and it's straight on to new lows from here.  Unfortunately, it's still not entirely clear which case this is, but we do have some zones (as outlined above) to watch for clues.  Trade safe.

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