SPX, INDU, COMPQ: Bear Chart to Force Rally?

Since last update, SPX dipped a quick toe below last week's low (though ES held above the comparable low).

Let's look at a long-term chart we haven't looked at in a while:

Near-term, SPX is still testing the edge:

COMPQ remains above long-term support:

INDU remains below its first support zone, but above its second:

Finally, it might be time to force bulls into a rally -- by bringing out this old, very bearish chart.  In the event this IS a diagonal, when the diagonal completes, a trip back below Dow 20K would be the normal result (not all in the same day, obviously -- but probably over a couple years):

In conclusion, not much else to add here -- the market remains above most of its key levels, at least for now.  The inclusion of the most bearish chart in my chartbook might force the market to rally today (I'm joking... sort of).  Trade safe.

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.