SPX, COMPQ, INDU: And a New Chart

Since last update, SPX stalled at channel resistance and has ground its way lower.  Let's get right to the charts; there's a new one to cover.

First up, COMPQ is still holding up, above support:

Here's the new chart, which discusses both the bull and bear cases:

INDU was rejected on its first test of resistance.  Because it's now back to support (the old low), it does have a window where it could decide to bounce again if it wants:

Finally, SPX.  I've added an "extended C" target because the possible bear nest has to be taken seriously for now, and if this is a bear nest, the standard C target may not allow enough space for it to unwind:

That's all the news that's fit to print.  Trade safe.

SPX, INDU, COMPQ: Plus the Biggest Risk in AI That No One is Talking About

Before we get into the charts, I want to talk about a new study, because it has implications for the broader market.

The study I'm referencing tested 35 AI models across 172 billion tokens of document information (in other words: the testing was robust).  Here's what the study found:

Even giving the AI the document and then asking about the document it was holding (i.e. -- not asking the AI to go from memory but to go from the data right in front of its virtual face), the very best AI model in the study fabricated answers 1.19% of the time.  That's under optimal conditions, not under a stressful real-world application.

Most top models fabricated at rates of 5% to 7%.  With the answers in hand.  The human equivalent would be looking at a page and still making up what it said.

The median fabrication rate across all 35 models tested was ~25%.

As I posted on X:  I think this problem isn't talked about enough. Because 100% of the "AI will save/destroy the world" expectations hinge on the ASSUMPTION that this problem will be solved at some point.

What if it just... never gets solved? What if it's fundamental to the way we've designed AI? What if our design guarantees this problem manifests and we can't solve it without losing all the progress we've made?  (The way, say, car designs guarantee that cars will roll and you can't solve "car rolls downhill when brakes are disengaged" without starting over from scratch.)

Jason Haver on X (this also contains the link to the study)

Because (as I posed in a follow up): Imagine a company where the CEO hallucinates data, sales figures, suppliers, manufacturing capacity, etc., at even a rate of 5% per day. That company is bankrupt before it even gets off the ground. ALL "AI will run everything" scenarios assume this gets solved favorably.

Or imagine a doctor who hallucinates illnesses you don't have and cures that don't exist.

In other words, the entire AI dream is built on the belief that this foundational problem will get solved.  If this problem does not get solved, then we're currently in a massive hubristic AI bubble.

I'm not saying it won't eventually get fixed -- I don't know whether it will or not.  I'm just saying: we have to consider the possibility that it doesn't.  In which case, AI may be a decent research partner (assuming you verify everything it tells you), and it may aid in general human progress the way, say, supercomputers did -- but it will never be able to run anything important on its own.

Food for thought.

Market-wise, last update concluded:

This is probably the last chance for bulls to pull a whipsaw.

And they did.  But, in INDU at least, they have not yet broken back above key resistance.  Let's look at SPX first:

INDU is below resistance and has so far only back-tested it:

COMPQ, on the other hand, is still above support (!):

In conclusion, at this exact moment, we have a mixed bag of signals.  SPX is in no-man's land; INDU is below resistance; COMPQ is above support.  This is an absolutely schizoid market, but what we can reasonably infer from this is that bulls are probably out of chances and likely need to keep this bounce going.  If they can't, then bears (probably) finally get the ball.  Trade safe.

SPX, COMPQ, INDU: Stop Messing with the Time Already

First off, we don't do DST here in Hawaii, so it's easy to forget it exists... but some internal buzzer was apparently set and told me I'd better check this morning.  God knows how I remembered that.  Otherwise, the update would have been late.

Last update noted that the market seemed to have reached a tipping point, and while nothing happened on Friday, futures are suggesting that this morning is going to open lower, so if bulls can't recover directly, then the market may have room to run.

We're still tracking the flat below as an increasingly live option:

SPX closed in its inflection zone:

INDU is below support:

COMPQ, however, is somehow *above* support -- for now:

In conclusion, it looks like SPX will open lower... this is probably the last chance for bulls to pull a whipsaw.  If they can't, then bears may take the wheel for a while.  Trade safe.

p.s.- if anyone is asking, I would prefer we stay on STANDARD Time, not DST.  We were just on Standard Time, which puts Hawaii 5 hours behind New York.  DST puts us 6 hours behind.  And no, Standard Time isn't what makes the days short -- Winter is what makes the days short.  Here's what sunrise and sunset would look like during the summer (when the days are long) if we stayed on the actual time (Standard Time, which is determined by the sun being overhead at noon).

SPX, INDU, COMPQ: Tipping Point on Deck

So the market remains poised on the edge of a balance beam, and bulls can't give away too much more here without the whole thing falling over.

I've moved the inflection box down slightly to better reflect the current reality... but there's going to come a point -- and we may have finally reached that point -- where if it goes much lower, it's just going to run.

INDU is below its support zones at the moment:

COMPQ is above its IT zones -- for now:

Finally, the SPX expanded flat chart illustration:

In conclusion, I think bulls are finally on thin ice.  Prior to recently, I haven't been too concerned with minor new lows... but I suspect we've finally reached the point -- after months of waiting -- where if the market tips too much further and sustains a breakdown, sellers will take over.  Again, SPX might still tolerate one more short whipsaw of the most recent low -- but I don't think it will tolerate much more than that.  Trade safe.

SPX and INDU: Some Interesting Things

Some interesting things have happened since last update.  

Let's start with INDU, which captured its standing target:

SPX briefly dipped below the highlighted box I drew on Monday and found support at a trendline we've been watching for roughly a month now.

It effectively tested the trendline on this chart as well, though it didn't quite touch it:

In conclusion, bulls probably need to mount a comeback now.  If the market sustains trade below these support levels, then the market will be falling into some potential "air zones," where trend support gets thin.  Trade safe.

SPX and INDU Updates

Most of the market barely budged on Friday, leaving us in more or less the same position we were then. Maybe the most interesting thing to happen was that INDU dipped below its blue trendline, but then closed on it -- so the jury's out as to whether this will become a sustained break or a whipsaw:

SPX basically has two primary options here:

1. The current decline is part of a nested third wave down (in which case, we're likely embarking on the expanded flat we've been watching for three months).

2. The current decline is part of wave 2/b down and getting close to bouncing.

Hence the inflection zone highlighted on this chart:

Finally, the most bearish option in detail below:

Not much else to add beyond all that.  Trade safe.

SPX, INDU, COMPQ: Detailing the Bear Case (again)

So the market has remained range-bound, but I'm going to rehash some of the bear options I've covered over the past few months, since they're worth revisiting.  Let's start with the oldest one: SPX -- but I've drawn a new chart to help readers.  Because it finally feels like the right time to actually draw this chart, for whatever that ends up meaning (it just feels like the market finally wants to do something soon, one way or the other. Maybe lol.).

The old chart is unchanged:

INDU's chart discusses its options:

Finally, COMPQ again:

In conclusion, SPX's most recent rally was a clear three wave structure -- so far.  Which means bulls probably don't want to see a sustained break of 6775 now, because that would put the option of a bear nest on the table and could lead to a rapid drop.  Note that a RETEST of the ~6775 zone is still an option, so a slight break wouldn't be the complete end of the world yet.  But a sustained breakdown on accelerating momentum would point toward the expanded flat and ~6356.  Trade safe.

SPX, COMPQ, INDU: The Least Exciting Market in History

The market once again did nothing, as it's been doing for almost three months now.  

INDU did test the blue trend line again, so I guess that's a thing.  It was enough to make an annotation on the chart, at least.  I mean, honestly, I didn't really NEED to make an annotation about it -- I think my threshold for what gets annotated is just low at the moment, because there's been nothing worth annotating in like 10 days.

SPX barely moved in the last two days:

Same with COMPQ:

In conclusion, there is, of course, nothing to add to the past... what?  Couple of weeks of updates?  Three months of updates?  I mean, really, we're still in the "will it/won't it?" zone for that expanded flat I outlined (in SPX) way back on December 8, 2025.  And I've since covered the bull case and bear cases several times in the event the market ever leaves this zone.  So yeah, just not a lot to say that hasn't been said three or four times by now.  

I guess on the plus side, some analysts have undoubtedly spent the last three months screaming day in and day out that something or other is "imminent!" and they've all been wrong (I'm not thinking of anyone in particular, I'm just guessing based on ~30 years of experience).  We've avoided that game, at least, so we've got that going for us.

Anyway, did you hear the one about the Fed Governor?  Trade safe.

SPX, COMPQ, INDU: No Change

The market remained in a holding pattern on Friday, so there's nothing to add to the last three or four updates.

Everything is basically in the same place.

INDU:

SPX:

COMPQ:

So far, bulls are holding what they need to.  The last few updates have covered why they want to continue that and what could happen if they don't, so please refer back to them if you missed those discussions.  Trade safe.

SPX, INDU, COMPQ: The Thin Blue Line Between Correction and Bull

Last update talked about the need for bulls not to give too much more ground.  Let's take a deeper dive into that, because it's a bit layered.

On one layer, we have SPX, which is just going to start to look... not great if bulls let the market fall too much farther below its prior swing low.  This is because of the potential bearish 1-2 nest -- but we'll look at some more nuance in the charts that follow.

Next, let's look at some "no interpretation needed" charts.  INDU is the old standby here, and it's still above its key support levels:

Next, COMPQ's near-term chart.  There's not a lot to say about this chart that hasn't already been said to death, but there's more to discuss about COMPQ in the chart that follows this one:

The COMPQ chart that really matters it the one below, for reasons outlined on the chart:

On the COMPQ chart above, we can see that in 2024, COMPQ cracked the blue line for a minute, but recovered it quickly.  The more important observation is that every other time COMPQ sustained trade south of blue, a larger correction followed.  Which means, that's the clearest line we've got for COMPQ.  Nothing that happens ABOVE blue is anything other than noise.  If COMPQ sustains trade below it, though, we probably have to assume -- based on three prior events -- that a larger correction is underway.  Trade safe.

SPX, COMPQ, INDU: Bulls Running Out of Real Estate?

Since last update, COMPQ moved deeper into its blue support zone -- then bounced again.  Bulls probably need to keep this bounce going, or they may run out of real estate:

SPX is above near-term support, but here again, bulls probably need to keep the rally going, just because the structure is going to start looking squirrely if SPX heads too much lower:

INDU remains above long-term support:

In conclusion, even though it's hard to draw high-confidence conclusions within a multi-month noise zone (like the one we're in), my instinct is that bulls probably can't afford to give too much more ground here, or things may turn in the bears' favor for at least a while.  Trade safe.

SPX, COMPQ, INDU: The Dirty Dozen

Last update noted that the market had reached resistance "for the eighty-third time" (it was actually the eighty-fourth), and the market reacted by dropping back into the noise zone.

Worth knowing that the more often a price zone is traveled, the weaker support and resistance become in the middle of that zone and the more the edges start to be the only things that matter.  This is now literally the TWELTH time SPX has covered this same price territory in only two months, so most of the middle range buyers and sellers have been cleared, which is why price moves tend to become faster.

The net end result is that we still have to keep the expanded flat potential, which I first mentioned way back on December 8, in mind.

Bigger picture, INDU is still above its key zone, so we can't take any of this too seriously as long as that continues to be the case. Yes, it could always ultimately fail -- but we don't really have anything pointing that way until it actually does.

Near-term, INDU reacted to its last resistance zone, so no huge surprise there:

COMPQ is another one worth watching and where, IF things start breaking, we might have reason to think more things will break.  But as of right now, it also remains above key support:

In conclusion, additional near-term downside is always possible and wouldn't immediately break anything.  Sustained downside might, but given how the last two months have gone, it's probably prudent to let the market lead us to that conclusion, as opposed to imposing it on the market without evidence.  The first bear option remains the expanded flat first discussed two months and a week ago.  Trade safe.

SPX, COMPQ, INDU Updates: No Gnus is Good Gnus

I'm going to reprint last update's conclusion, because 1) we did get more upside since and 2) it's still the prevailing thesis:

In conclusion, there's still nothing to get bearish about yet.  If they want to make things complex, they could turn INDU's high into a b-wave high and run back at support again, maybe whipsawing below it to really throw everyone before rallying back up.  But they don't need to do that and could just run higher from here.  Either way, we'd still need to see sustained trade and closes before long-term support before getting particularly bearish. 

INDU rallied up to its next resistance zone, as suggested last update:

Big picture, it's put some distance between it and long-term support:

COMPQ hurdled its near-term resistance and back-tested that line at the close:

And finally, SPX is back to its recent resistance zone for the eighty-third time:

In conclusion, no change from recent updates.  Trade safe.

SPX, INDU, COMPQ: Keeping It Easy

Last update concluded that there was still nothing to get bearish about:

INDU, SPX, and COMPQ are all still above long-term support.  INDU and COMPQ are brushing against it, but bears are going to need to sustain trade and closes below that support to make this look like anything more than noise. 

Not surprisingly, everything rebounded on Friday.

The problem bears have now is that INDU and NYA (not shown) both look like three waves into their new all-time-highs, which suggests more upside on the horizon -- either directly or after more noise.

INDU has continued holding its key long-term support, which has actually made this pretty easy for everyone (or at least, for everyone who reads these updates and knew about that key zone!):

On the next INDU chart, you can clearly see the three-wave structure into the current high:

COMPQ bounced from its support zone but hasn't hurdled short-term resistance yet, so that's worth watching for near-term traders:

And finally, SPX, which never broke below its black trendline:

In conclusion, there's still nothing to get bearish about yet.  If they want to make things complex, they could turn INDU's high into a b-wave high and run back at support again, maybe whipsawing below it to really throw everyone before rallying back up.  But they don't need to do that and could just run higher from here.  Either way, we'd still need to see sustained trade and closes before long-term support before getting particularly bearish.  Trade safe.