Monday, December 11, 2023

SPX and BKX: Caveat Subscriptor

There are two major aspects to what I present through these updates:

One aspect is the technical side of things, typically in the form of Elliott Wave counts, which are based on a combination of concrete patterns and gut instinct, in which I (almost) always present both sides of the trade.  The other aspect is something readers always seem to want (often even when I haven't offered it), which amounts to "okay, but which way are you leaning?"  That aspect is typically based on a combination of technicals, fundamentals, and, of course, gut instinct.

None of it is foolproof, but let's examine a recent case in point, because it illustrates the conundrum well.  For months leading into the recent swing low, my charts pointed to that price zone, often with the label "3/C" (or "C/3," same thing).  That was my technical (mixed with some gut instinct) read on where we were headed for the immediate future.  In Elliott Wave, a C-wave always represents three down (or up), which is always an inflection zone -- though in this instance, I further mentioned that my lean was that we'd go on to form five down.  That lean was based largely on the seemingly-awful fundamentals that the market faces, but that lean turned out to be in error.

What was not in error was the location of the inflection zone (SPX 4090-4115; in fact, the market nailed it dead-center).  It's just that many of us (including me) thought that wasn't going to be the end of it.  As I wrote on October 26 (in an update appropriately titled:  Now Entering "Bounce or Break" Territory):

Yesterday, SPX came within 7 points of its preferred target zone, which also puts it into the C-wave inflection zone (not that I'm expecting this to be a C-wave, but I'm not always right, so I never ignore things that run counter to my biases):

That was followed by this chart: 

So on the one hand, the technical aspect worked flawlessly in this case -- but my lean that we'd go on to form an impulse did not.  It's important to understand the difference between those two things -- my lean is always an xx% vs. xx% proposition; it is NEVER, EVER 100% vs 0%.  Never.  Usually pretty far from it, as it's usually 5x% vs. 4x% (i.e.- 53% to 47% or similar).  

Even the technical aspect isn't 100%.  (Nothing I believe about anything is 100%, for that matter, at least as far as I'm concerned.)  I feel like I've made that pretty clear over the years, but in case I haven't, there it is again.

In this instance, I probably needed to focus more on the warnings and caveats for bears.  I covered them a few times, but probably didn't highlight them enough.  

Below, I intentionally left the labels on this chart as they were -- next update I'll delete the 1/2/3, since we know now that it was the A/B/C portion of those labels.

Anyway, I'll try to caveat more in the future.  Usually I'm pretty good about that, but I don't think I did it enough at this last inflection.

Beyond that, I really don't have a lot to add here about the current market -- I'm still awaiting an impulsive turn, as I have since I wrote about that publicly on November 8 (we had one quick little false alarm since then, but after it shook out, it was back to waiting).  Until then, there's not much for bears to sink their teeth into, and the market could run higher in the meantime.  As mentioned last update, BKX (and many other markets) has/have reached resistance, but that doesn't mean the market won't break through it:

Trade safe.

No comments:

Post a Comment