SPX and INDU: And Where Does That Leave Bears?

So bears' fumble (discussed last update) may end up costing them the game.  Bears have one out remaining, so it's not over just yet (we'll discuss that in a moment), but we're in the fourth quarter, and bears are behind by 5, so they're going to need a touchdown to win this thing.

Presuming SPX breaks 2475 (which it look likely to do this morning, but who knows for sure -- ignore the rest of this if it doesn't), the remaining out for bears would be in the form of a 3-3-5 flat.  That would have the first ABC as a larger wave (A), with the current rally in C of the larger (B), with the large (C) to follow down to new lows.  The crummy thing about 3-3-5 flats is that they are all-but impossible to anticipate in advance -- but the first step with any pattern is to at least have the awareness in advance, and that we have.

So, if SPX sustains a breakout over 2475, then it's probably headed toward 2485-90 (with 2489 being the "perfect world" target).  From there, it's entirely possible bears will turn this thing back down.  So we'll be watching for impulsive reversals to provide the next piece of that puzzle.  And that's about all that can be done with such a pattern.

INDU is in a similar position -- so we're either looking at black "alt: v" underway currently, or we'll see a similar retest of the ATH in a (B) wave:

In conclusion, bulls have continued breaking each bear warning level, while bears never broke the important bull warning level -- so we can't and shouldn't ignore that.  At this point, it's pretty clear that either we're still unwinding lower-degree fifth waves (which thus would temporarily stall the big fourth wave we anticipated), or the market is going for a larger 3-3-5 flat, to punch in that a big, time-consuming fourth wave more directly.  Trade safe.

SPX and BKX: Bears Fumble on the 3 Yard Line... but the Game's Not Over Just Yet

Well, yesterday was both good and bad for bears.  It was a great day for anyone who was trading the charts on a short-term basis, as the near-term preferred count had been anticipating a break below 2437 and the SPX cash market opened way down at 2428.  This made for an easy 22+ points of profit for anyone who sold the 2450-54 target zone and closed in the downside target zone (which, for cash traders, would have entailed taking at least partial profits directly upon the cash open). 

But the market quickly recovered, so the day ended up being a disappointment for any bears who were holding out hope for more follow-through.  This behavior forces bears to be a bit cautious going forward, because that type of price action suggests a lot of buyers were waiting in the wings (more on this later).  So if SPX sustains a breakout over next resistance (2455ish), then bears will have to behave even more cautiously, especially until the next target is reached, and/or until the market gives signs of reversing.

That said, there is still a chance that 2455 resistance will hold and that yesterday was a "one off" for bulls.  The upcoming sessions will answer that directly.

BKX is worth another look here, because it's indicating that it's reached an inflection point, but also indicating that if this inflection point fails, it is likely to fail significantly.  The preferred count remains bearish for now. 

(NOTE:  For some reason, Stockcharts is severely messing up my labels here, no matter how many times I try to fix them.  So please forgive the sloppiness of the chart.)

In conclusion, yesterday indicated lots of buyers were waiting for lower prices, and sometimes that's quite bullish.  But there are also times when buyers trip over themselves for a day, only to find that everyone who wanted to buy got in on that same day, and there are not enough buyers left after that.  As noted, the upcoming sessions are going to tell us which instance this was.  For the moment, I'm still leaning bearish on the bigger picture.  Trade safe.

SPX and INDU: Near-term Target Capture and Reverse Keeps Bears in the Game

In the prior update, we expected SPX to rally up to 2450-55 and reverse lower (technically this prediction predated the update by a day, since I mentioned it on Thursday morning in our forums).  On Friday, that's what the market did.  It looks as good as it can for bears right now, and their near-term stop levels remain clear.  In addition, the daily bar on SPX (not shown) typically hints at some degree of downside follow-through.

I'm reading the low at 2436 as a b-wave, but it's not impossible for this to be part of a triangle.  Triangles often have complex waves such as double-zigzags that can throw you off -- so just in case, I've drawn up a chart with one alternate near-term bullish bear count:

INDU has, so far, been treating the blue line as resistance.  Which is how bears would like it to remain, of course:

In conclusion, there's no material change from the past few updates.  Trade safe.

SPX Update: No Material Change

There's no change since the prior update, so we're just going to look at SPX and its near-term options.

The first thing that jumps out on the chart is that we have a decline from SPX 2454.77 that looks like it is probably incomplete.  If we presume that to be correct, then there are two main options:

1.  The low at SPX 2436 is a b-wave, which would see us rally toward 50-54 before reversing back down to break that low (including the potential for several days of up/down/up/down around those two extremes).

2.  SPX heads lower more directly, thus suggesting either a micro bear nest lower, or an ending diagonal nearing completion.  A rapid and sustained breakdown would suggest the former.

The third option, of course is that neither of these options are correct.  And that's always possible too, so I've discussed that on the chart below:

In conclusion, my near-term preference is for one of the two numbered options discussed above the chart, both of which imply an incomplete near-term decline.  If bulls pull out a near-term surprise here, then things will become a little more challenging, at least initially  And of course there's Fed Speak today, so that should keep everyone on their toes (except for Janet, who has no toes per Federal regulations).  Trade safe.

SPX and INDU: Bulls Defend Their Zone -- but Will It Hold?

In the last update, I talked about the potential ABC decline and how bulls needed to hold the zone around Friday's low to make something of that potential.  I concluded the update with the following thoughts:

if bulls are going to stick-save this monster, they probably have to do so now.  It looks probable that they will ultimately fail in that endeavor, and thus that bears still have the ball -- but nevertheless, it's a good area for bears to avoid complacency.

Yesterday, the bulls read the update, slapped their bull foreheads, and launched the rally they needed, thus doing their best to make everyone believe there was a complete ABC decline in place.  Despite that, I'm still inclined to lean toward the bears.  Either way, the best thing about this pattern now is that we have a VERY clear confirmation level to watch, along with targets that should be fairly reliable.  This is all discussed in detail on the SPX chart: 

INDU did manage the test of the blue trend line from the underside:

In conclusion, bears haven't had much luck with bear nests in recent years, but this time just might be different.  Whether it is or not, at least there is a very clear confirmation level for bears to watch (and for bulls to defend), and probable targets to aim for if/when that level fails.  Trade safe.

SPX, INDU, RUT: Next Downside Targets Captured

So here's where things stand:  SPX has formed a perfect "potential ABC" down, but bulls will have to hold the zone around Friday's low to make something of that potential.  I'm inclined to think this probably is NOT an ABC, just an ABC look-alike -- so that zone probably won't hold, but it's not impossible for SPX to bounce around for a while in the meantime.  It's also not impossible that my inclination is wrong, of course, so bears shouldn't get complacent.

In the "victory lap" category, the decline in SPX has now overlapped both red 1 and red i, which has validated my labeling of the smaller red 5 -- significant because this was correctly predicted (and correctly targeted) while the rally was still underway:

INDU has nearly reached its next downside target... and, at this exact moment, it looks like it's probably going to end up being either a case of either "close enough" or "we'll shoot past it."

RUT has captured and exceeded its first downside target, which was the "or ii of 5" on the chart below.  All current indications suggest it's headed toward the blue (iv) target at the bottom of the megaphone, but it hasn't QUITE invalidated "or ii" just yet, though it's very close.

In conclusion, if bulls are going to stick-save this monster, they probably have to do so now.  It looks probable that they will ultimately fail in that endeavor, and thus that bears still have the ball -- but nevertheless, it's a good area for bears to avoid complacency.  Trade safe.

SPX, INDU, NDX, BKX: A Bad Day for Bulls

Here's a sentence I haven't typed in a long time:  Yesterday was an ugly day for bulls.  Amazingly, it's starting to look increasingly likely that the "Bull 5" peak, which we began anticipating well in advance (at SPX 2489-2500, and north of 22,000 for INDU) may indeed have been correct.

SPX got smacked down by my first resistance level like a mosquito at a WWE match.  It does have a major inflection zone approaching on the radar, so that will be the next test for bears (if we get there, of course):

INDU has continued turning, and is now under first support, with the 21,500 target (mentioned last update) on the radar:

NDX threw a minor curveball and appears to have formed a running flat, which caused it to turn south slightly below its ideal target zone:

And BKX -- remember BKX?  Several months before Dennis Gartman decided to "stake his reputation" on the end of the bull market, we were predicting that BKX was already in the midst of a meaningful correction.  Of course, it still has a ways to go, so it's still technically possible I could have to eat crow on this call -- but it looks "as good as it gets" so far, anyway:

In conclusion, bears fired a serious warning shot yesterday, and as I mentioned a few updates back, if 5 is indeed complete, then this decline is just getting warmed up.  That said, we can't entirely count bulls out yet, but things do look more promising for bears than they have in a long time.  Trade safe.