SPX, COMPQ: Manage Accordingly

The entire function of Wednesday's update was to deliver a series of warnings to bulls, noting:

1. COMPQ had done enough for a complete rally

2. The rally could die at current levels, given the proximity to the all-time-high, and 

3. that if SPX whipsawed its last breakout, it could suggest "a strong move in the opposite direction."

Last update was a case of "something bothering me" in the charts, but we didn't have any clear impulsive declines to call out, so I couldn't point to any form of proof for readers... but the instinct was strong enough that it led to an update that was basically nothing but warnings, even down to the final conclusion.  

Sometimes that's the best I can do: Convey my intuition -- though intuitions are often, by nature, a little vague.  Hopefully, given that it was paired with "watch these specific signals" warnings (COMPQ, SPX), it was helpful.

With COMPQ, I've been warning for a week that it had stalled at blue and hence might retest black from above -- so, while not "proof" of a pending reversal, this was nonetheless specific in detail.

SPX provided the cleanest signal, and its whipsaw of the red breakout was the main actionable tell:

I also dug a decade-old chart out of mothballs, because it's interesting here:

In conclusion, it's worth mentioning that if the bull count is active, this decline could either fit as a fourth or a second wave (at higher degree).  But in this market, given the massive downside potential, bulls might now want to await clear signs of a bottom (impulsive rallies, etc.) before getting too aggressive.  Because:

Even if this is "just" a second wave -- a second wave could retest the crash low.

A fourth wave wouldn't travel that low, but still has hundreds of points (in SPX) of leeway.

In other words, even the bull counts could be pretty horrifying to attempt to ride out.
And, of course, the bear count breaks the crash low.

So, we're not "writing off the bulls" here -- this could well be a correction to an ongoing rally. 
But we also know the downside risk, which is massive -- so we should manage accordingly.

The first warning for bulls would be sustained trade south of the black channel (noted on Wednesday as the first downside target).  If that channel holds, then no harm, no foul.

Trade safe.