SPX, COMPQ, BKX: Bull Case, Bear Case -- Head Case

This has not been the easiest market lately from either side of the trade.  I felt direction was pretty clear heading into SPX 1820, but at that point, I felt things got a bit iffy, which I hope I conveyed, though honestly I've been berating myself for not conveying it better.  Personally, I have been incredibly cautious during this rally, and have kept my risk profile very low since SPX 1820 -- and that approach has saved me a lot of capital.  But one of my goals with these updates is to help other people protect their capital, so I went back and checked to see how well I conveyed my feelings about the market's recent position.  On Friday, I wrote:

Wednesday was a good session for bears, as SPX captured its preferred target zone of 1824-33 (low of 1820.66), which was good for about 100 points of profit in four sessions.  We hit the intermediate turn well, and we've captured the lion's share of this decline off the all-time high, but now it's time for a little humility.  I'll discuss why below.

Let's start with the simplest wave count.  The first question we have to ask ourselves is if we believe this decline will be an ABC or a five-wave impulsive decline at higher degree -- and the honest answer is that no one knows for certain.  By all rights, momentum and most other indicators suggest that the final bottom isn't in yet, so odds favor new lows to come.  Therefore, we can make the assumption that we're in wave (4)-up with (5)-down to come, but we do have to remain aware that this is only an assumption.  

On Monday, I wrote:

In conclusion, amidst all the anticipation of new lows, I would again like to remind bears to pay attention to the basics in the form of trend lines and key downside levels.  If the market wanted to form an intermediate ABC decline, there are enough waves in place for said decline.  So, although it appears that the decline is not yet over on an intermediate basis, the first impulsive decline in a bull market is never a given -- and we must always honor both sides of the trade.

My conclusion is that I'm not sure how I feel about all that, and frankly, I think I could have done a better job conveying how cautious I was feeling about the bear odds at recent price levels.  But it is what it is at this point, and all I can do is try to convey those thoughts better in the future.

Water under the bridge, though, so let's see where we are now.  The market is in a bit of a no-man's land at current levels, so I'm going to cover the bull case and the bear case with as much detail as I can, given the very short time I have remaining as a result of Time Warner Oceanic's "system maintenance" that left me without blog access for a while.

We'll start with the bull case, via COMPQ:

And a closer look:

Now we'll look at the bear case, via two charts of BKX.

The 30-minute chart shows the detail, and why it's difficult to count the decline as complete:

Finally, SPX overlapped the 1926 zone handily, which pretty much rules out of fourth wave.  It's no-man's land for wave counts here, so I've highlighted a couple potential resistance zones.

In conclusion -- on Friday, I wrote the following to my forum members, and I think this conveyed my thoughts better than just about anything I've written in the updates.  It continues to convey my thoughts at this stage, so I'll end this update with Friday's comment:

I'm inclined to short the good R/R inflection points more than I'm inclined to buy the dips right now -- but that isn't a matter of conviction (despite what seems to be popular opinion), it's simply a matter of intermediate trend and comparative R/R. I'm somewhat agnostic to direction for the time being... so I'll short the inflection points when it seems appropriate, and be quick to bail if things don't pan out.
 
Direction has been clear since last month -- but right now, every trade on both sides is speculative, in my opinion. My strategy at times like this is to await the near-perfect entries (like 1898 SPX), but otherwise sit things out (unless, of course, something just screams at me in real-time).

The bottom line is I'm not in a hurry to give back my profits of the past few weeks. This market will make sense again soon enough.

Trade safe.

SPX Update: Detailing the 1-Minute Chart

After spending a ridiculous amount of time on one chart for this update, there's actually surprisingly little to add to Friday's update.  So far, the rally stalled at the noted key level of 1898, and has enough waves in place to be a complete ABC.

I'm going to start with the chart that I spent the most time on, which is a one-minute chart with some "thinking out loud" annotations.  If you don't like complex charts, then (to make it as simple as possible) C/3 could very well be complete at 1898.

Next is an updated version of the 10-minute SPX chart I published on Friday.  Note the rally stalled twice at the red trend line (I deleted the annotation that mentioned that line as important, but suffice to say it's somewhat informative that bulls failed to break out over it).

Finally, the simple bigger-picture chart.  This is still my preferred path heading forward; until the picture changes, I am leaning toward new lows, ideally in the form of a complex fourth wave (gray (4)).  In the event the market does make new lows, if it subsequently fails to hold support in the 1800-1814 zone, then we'd anticipate that gray (4) was already complete as opposed to complex as shown.

In conclusion, amidst all the anticipation of new lows, I would again like to remind bears to pay attention to the basics in the form of trend lines and key downside levels.  If the market wanted to form an intermediate ABC decline, there are enough waves in place for said decline.  So, although it appears that the decline is not yet over on an intermediate basis, the first impulsive decline in a bull market is never a given -- and we must always honor both sides of the trade.  Trade safe. 

SPX Update: A Simple Update in a Complex Market

Rest assured that I've looked at a lot of charts "behind the scenes" over the past 48-hours, but to keep things as simple-to-follow as possible, I'm only going to publish three charts.

Wednesday was a good session for bears, as SPX captured its preferred target zone of 1824-33 (low of 1820.66), which was good for about 100 points of profit in four sessions.  We hit the intermediate turn well, and we've captured the lion's share of this decline off the all-time high, but now it's time for a little humility.  I'll discuss why below.

Let's start with the simplest wave count.  The first question we have to ask ourselves is if we believe this decline will be an ABC or a five-wave impulsive decline at higher degree -- and the honest answer is that no one knows for certain.  By all rights, momentum and most other indicators suggest that the final bottom isn't in yet, so odds favor new lows to come.  Therefore, we can make the assumption that we're in wave (4)-up with (5)-down to come, but we do have to remain aware that this is only an assumption.

For the record, the gray path to "or (4)" shown below would be my "perfect world" outcome here, as follows:  A quick pop today, followed by a decline that breaks the prior low (probably finding support near 1814) then a sudden rally up toward 1898 +/-, and then another decline to new lows.

The question bears will ask is why I have wave (5) labeled near 1814, because that's far too short for typical Elliott Wave expectations.  I'll answer that with the daily chart below.  Note that the gray path I outlined above would work as one solution to resolve these conflicting market pressures.

The near-term chart is a little more complex.

On Wednesday, I published the following chart in our forums, and I'd like to update it and make it public now.  This chart has the potential to be a bit confusing, but suffice it to say that during Wednesday's session, I began viewing the last decline as (yes, another) extended fifth wave.  Be aware that red 5 of (3)/C does not end at blue 1 -- in this count, blue 1 is actually the first wave of red 5 (thus wave 3 is not the shortest wave).
 

In conclusion, to keep things as simple as possible with the market in a very complex position:  My perfect world outcome would be the gray path shown on the first chart.  That could always be blown up as early as today's session, though, so I've outlined some additional signals and levels on the 10-minute chart.  Trade safe.

SPX and COMPQ Capture First Intermediate Targets -- What Next?

A few interesting things have happened since Monday's update:

1.  SPX captured its first intermediate target zone (1885-1891).

2.  COMPQ captured its first intermediate target zone (4200 +/-)

3.  The near-term bullish (still intermediate bearish) B-wave option is effectively off the table.

Before going further, I'd also like to refer back to a couple important paragraphs from Monday's update, because these remain important with the market in its current position:

As I wrote a couple weeks ago, though, do keep in mind that "there's no such thing as support in a bear market" (see 9/24 annotation) -- so if the market has entered a bear phase, then support zones will mean much less than they did during the bull phase, and will end up functioning primarily as bull traps.

The 2-hour chart notes that, here again, this market has reached a potential support zone.  This is tricky here for bulls, though, because third waves are very unforgiving to counter-trend trading.  If the market has already entered blue (3)/C, then every bounce along the way is going to be sold to new lows and there will be no second chances to exit longs for profit.  So unless one wishes to end up becoming a "long-term buy-and-hold investor" at SPX 1900ish, I would suggest staying very nimble with any long positions.  The trend is down at the moment, thus the lion's share of intermediate profits will likely come from selling the bounces, not buying the dips.

Beyond that, I'm going to keep things fairly simple for today's update.

We'll start with COMPQ -- but before looking at the current chart, let's take a quick look at the COMPQ chart I drew on September 29.  From time-to-time I post things like this, because I've occasionally heard people grumble that Elliott Wave is a bunch of malarkey and there's no way it can work and besides, the market's unpredictable, and you can't pick tops or bottoms or time the market, and blahblahblah blah.  Plus:  blah!

So, in response, here was the only Elliott Wave count I posted for COMPQ, complete with projections, all the way back on August 29.  If anyone wants to insist this was pure random dumb blind luck, and that Elliott Wave doesn't work (especially considering that the wave counts were not bearish in the months heading into the top; even the first line on the chart goes up to V), then my only reply is this:  Get your own column.

Below is the current COMPQ chart.  As noted, the B-wave was slightly time-compressed verses how I drew it above, yet it peaked in the expected price zone.  For reference, I rarely do time projections -- I generally just do price, and then try to utilize the chart space so that the projections are easy to follow.

At this point, we do have to stick an "alt: C" on there, in honor of the fact that COMPQ has reached its A=C target zone -- but currently, there's nothing to indicate the bottom of C has arrived, and the preferred count remains pointed toward 4090-4110, with potential for even lower prices.  

SPX's 2-hour chart is below.  SPX has dropped through the gray base channel as anticipated, and has remained within the blue crash channel.  Bears shouldn't really consider anything other than sticking to "short and hold" mode as long as that blue channel remains intact.  This is what they've been waiting for, after all.

I drew the 2-minute chart yesterday, when future were still trading roughly flat, and thus I discussed an alternate near-term count.  As of the time of publication, that count is looking like it's become an even "less than alternate" count, and assuming the futures decline sticks through the open, the black alternate ABC count may be able to be ruled out within seconds of the cash open.

The preferred near-term count is that the market has been coiling, and is about to finally see the breakaway-type decline that has been conspicuously absent to this point.

NOTE:  Typo -- 1940-51 should be 1840-51.

In conclusion, the intermediate preferred count remains bearish, as it has since September 24, and the near-term preferred count is presently bearish.  Bears have no reason for any anxiety whatsoever as long as SPX remains within its crash channel.  Trade safe.

SPX, INDU, TRAN: Market Reaches Near-term Inflection Point; but Intermediate-term Unchanged

Nothing has changed to the intermediate picture in the past few weeks, and that remains bearish.  But the near-term is still up for grabs, so in this update I'll try to cover a few signals to watch.

Let's start with INDU's "simple" chart from a few weeks ago.  On Friday, INDU captured my target from October 29, and has accordingly reached a potential support zone.  As I wrote a couple weeks ago, though, do keep in mind that "there's no such thing as support in a bear market" (see 9/24 annotation) -- so if the market has entered a bear phase, then support zones will mean much less than they did during the bull phase, and will end up functioning primarily as bull traps.

The 5-minute INDU chart shows that both near-term options discussed on Friday still remain viable, and there's been nothing conclusive yet to rule out one or the other.  Spectacular failure of the lower blue channel line would be the bearish expectation, while the near-term bull option would need to muster a bounce very quickly to remain on the table.

On the SPX 30-minute chart, the very first step for bulls to even begin to gain a little traction would be to break out of the blue waterfall channel:

The 2-hour chart notes that, here again, this market has reached a potential support zone.  This is tricky here for bulls, though, because third waves are very unforgiving to counter-trend trading.  If the market has already entered blue (3)/C, then every bounce along the way is going to be sold to new lows and there will be no second chances to exit longs for profit.  So unless one wishes to end up becoming a "long-term buy-and-hold investor" at SPX 1900ish, I would suggest staying very nimble with any long positions.  The trend is down at the moment, thus the lion's share of intermediate profits will likely come from selling the bounces, not buying the dips.

Finally, TRAN is another market that's reached potential support:

In conclusion, this is a key inflection point for the near-term, though I do not believe it's an intermediate inflection point.  Nothing has changed in my intermediate stance since September 24, and I still believe bears have the ball for the intermediate-term either way -- but bulls do still have a shot at mustering a near-term rally, and it has the potential to be a solid rally.  Whether they will or not is another question entirely. 

It's interesting how the wave counts have set up here, in that if support fails significantly, that will essentially confirm that we're in the middle of a third wave decline... and the middle of third waves is the "point of recognition" for the masses.  What better catalyst for recognition could there be than a spectacular failure of support?

The main question in my mind is still simply "now or later?"

So, near-term, we have a few clues to watch to help sort out short-term bull option from the bearish option.  Intermediate term, I believe that even if bulls can put together a rally from here, that rally will be sold to new lows.  Trade safe.

SPX, INDU, NYA: Bulls Take a Beating

A lot of folks thought I was nuts back on October 6, when I said that the decline from the all-time high appeared impulsive to my eye, and that I felt that bullish calls for new highs were premature.  But I doubt I'm in the minority any more.

On October 6, I also outlined that my "best guess" was for the market to retest the low, then rally strongly in a double-retrace.  It did just that, but the subsequent rally failed to break the 1977 high, which would have been the typical expectation of the pattern.  If 1970 holds, then I think our best bet is to view that as a somewhat-rare running flat, wherein the c-wave fails to exceed the a-wave high (in this case, 1977).

Yesterday had all the hallmarks of the start of a third wave decline, since the majority were caught looking up while the market dropped relentlessly.  However, perhaps counter-intuitively, there is still an option for a rally back to that zone north of 1977.

In a normal market, I would just say that the third wave has started and be done with it.  But in this market, I am staying extremely alert to the rally option.  This is the type of pattern you really can't call in advance; it's enough to stay aware of it in order to make any necessary adjustments in real-time.

Below is the SPX 30-minute chart, which discusses this option in more detail:

The above-noted near-term bull potential would be very frustrating for bears who are already short and who don't remain nimble, but would be a blessing for bears who are looking for an opportunity to get short.

The SPX 2-hour chart ignores the above-option for purposes of keeping the chart clean, and notes the intermediate targets.  The intermediate count will most likely remain bearish in the event of the more complex flat and near-term rally discussed above.

INDU's chart also discusses the near-term bull count, which at the present price point is still about a 50/50 shot, and notes (in passing) the lone remaining intermediate bull count.  While I'm alert to the near-term bull option, I am currently discounting the intermediate bull count heavily enough that I'm not going to discuss it in any detail unless it becomes appropriate to do so.

NYA was one of the markets that kept me in the bear camp when many were turning bullish, and there were no surprises at all here over the past week:

In conclusion, I cannot confirm or deny the near-term bull option until the pattern develops a bit further, but I wanted to call it to readers' attention, because it's definitely something to remain aware of.   Regardless of how the near-term plays, I still remain intermediate bearish until further notice.  Trade safe.

SPX Update: Short and Simple

I apologize, but I ran short on time today, and, accordingly, have to do a relatively short update.

The simplest thing to do is reprint my "best guess" call from Monday:

If I had to "pick a side, any side," I would probably lean ever-so-slightly toward the extended fifth impulsive decline, but that's just because I'm a rebel.  Well, that -- plus that's what the pattern looks like to me.  And I think that pattern would burn a lot of people.

Just for grins, if this were an extended fifth, it would mean a corrective rally underway now -- one that could stretch out for a spell, with a possible "double-retrace" in store at some point.  That would see the market continue to rally for the near-term, then decline toward the recent low, but that test of the low would hold and we'd then rally back up to break that first high.

Hopefully the above at least kept readers from getting too bullish near the highs, as it seems many other traders did.

Step 1 and 2 of the suggested pattern have played out, and the market is now into the zone that qualifies as a retest of the low.  Basically, bulls need to hold it in the general vicinity of the 1926 low to have a near-term shot at another leg up.  They do not need to hold the exact low, because a brief break of the low would not rule out a b-wave (shown in red below).  But any break of the low would imply a third wave decline is in the cards, either immediately upon the break, or after a more prolonged rally to complete the "double retrace" (ideally toward the red 2 on the chart below).

The challenge on the chart below is that both the rally off the low, and the decline from the recent high, appear to be impulsive.  This makes it almost an impossible call as to whether we'll see another leg up or not.

 
In conclusion, my inclination remains that the decline from the all-time-high to 1926 SPX was impulsive (first waves are often sloppy and difficult to count, and that wave fits the bill), which means the rally is a correction to the decline.

It's worth noting that bears have pushed a few indices, such as RUT, to new lows -- and (although, obviously, one can never be 100% certain of the market's future) this was one of the points I tried to call attention to on Monday when I discussed the disconnect between large-caps and the broader market, which seemed to be showing more weakness than SPX and INDU.

The market is now roughly where I suspected it would be when I penned Monday's update, so at this point it's a simple matter of watching to see whether this test of the lows is successful or not.  Trade safe.

SPX, INDU, NYA: Bullish, Bearish, or Neutral?

Last update, I warned that the market had reached an inflection point, and that it was likely to rally over the near-term, but that the intermediate picture was a bit hazy.  Has the intermediate picture clarified since then?  Let's find out.

People hate uncertainty.  Some traders feel uncomfortable with the concept of neutrality, and would rather just "pick a side, any side!"  Some folks would even rather be wrong in the end, just as long as they can feel like they're being decisive in the moment.  And I think that's a fine approach for things such as choosing what you want when you're in line ahead of me at Starbucks (seriously, hurry up already!  Yes, Venti is the large size, for crying out loud; I thought everyone figured this out years ago.).

But, personally, when it comes to money, I would rather be right than be arbitrarily decisive.  And as I've said many times before:  Cash is a position, too.

I'm going to refer back to something I wrote on Friday:

I've been pretty openly bearish on the market since September 24 (See: "As Good as It Gets" for Bears), and SPX has since performed in line with expectations, and captured (and slightly exceeded) my downside targets.  But we have to recognize the market has now reached an inflection point.

This is where it's always tempting to overstep our bounds as traders and analysts.  There are certain patterns the market forms which are predictive -- for example, predictive patterns are what caused me to think a top might occur near SPX 2018-28, and caused me to think we'd decline to at least 1935-42.  But now the predictions have come to pass, and we've moved from a predictive market to an inflection point.  The reality is, with the market is its current position, no one on the planet can say with certainty what form will develop in the intermediate wave structure from here.  Not just yet, anyway.

So surely we're there now after one whole session, right?  Well... hmm... Let's take a look at the evidence.

We'll start with a simple weekly chart of SPX:

So, as seen above, large-caps have a potentially bullish candle on the weekly chart.  But when we look at the broad market, via the NYSE Composite Index (NYA), the picture isn't quite as inspiring.  Note NYA took out its last swing low, as opposed to making a (thus far) higher-low like SPX.

Thus we have a bit of a disconnect between various markets at the moment.  Let's look at the near-term charts, and see if that will help clarify things.

The chart below is a great example of what I call a "Rorschach chart" -- bulls will see bull patterns, bears will see bear patterns, Cookie Monster will see patterns that look like cookies, etc.

Some of that goes back to my discussion on people wanting to feel like they're being decisive.  The reality is, this pattern just isn't clear-cut -- but it would certainly feel more comfortable to pretend it was.  If I had to "pick a side, any side," I would probably lean ever-so-slightly toward the extended fifth impulsive decline, but that's just because I'm a rebel.  Well, that -- plus that's what the pattern looks like to me.  And I think that pattern would burn a lot of people.

Just for grins, if this were an extended fifth, it would mean a corrective rally underway now -- one that could stretch out for a spell, with a possible "double-retrace" in store at some point.  That would see the market continue to rally for the near-term, then decline toward the recent low, but that test of the low would hold and we'd then rally back up to break that first high.  A prolonged corrective rally with a higher low/higher high should also be sufficient to burn off some of the excess bearish sentiment.

But, again, I'm not entirely sold on that outcome.  I can see the bull case quite clearly for an ABC decline -- and we've been in a bull market for the past few years, so until that changes, the simple reality is that bears have to consider themselves the underdog in any market battle.

In COMPQ, we find a similar pattern.  COMPQ has nearly reached Friday's upside target.  Once that target is captured (assuming it is), then I will have no further strong opinion at this exact moment.  That may change by Wednesday's update, as the market will reveal more information in the continuing wave structure.

In conclusion, I think the near-term edge probably has to go to the bulls for now.

Intermediate term, I think the picture remains a bit fuzzy.  And I'm content with that.  We were on the right side of the decline from the beginning -- and this move captured its downside target, plus a few points for good measure.  Thursday's impulsive rally then warned that profits should be protected on any remaining shorts, and got us looking up instead of down.  It's okay not to know what the market will do every second of every day -- we just need to have a good idea often enough to make money; and then be able to adjust to changing conditions as necessary.  Trade safe.

SPX, INDU, COMPQ: Market Reaches Inflection Point

I've been pretty openly bearish on the market since September 24 (See: "As Good as It Gets" for Bears), and SPX has since performed in line with expectations, and captured (and slightly exceeded) my downside targets.  But we have to recognize the market has now reached an inflection point.

This is where it's always tempting to overstep our bounds as traders and analysts.  There are certain patterns the market forms which are predictive -- for example, predictive patterns are what caused me to think a top might occur near SPX 2018-28, and caused me to think we'd decline to at least 1935-42.  But now the predictions have come to pass, and we've moved from a predictive market to an inflection point.  The reality is, with the market is its current position, no one on the planet can say with certainty what form will develop in the intermediate wave structure from here.  Not just yet, anyway.

Let's start with INDU for illustration.  I've put (4) and (5) in gray because they are unknown variables in the equation at the moment.  If INDU wants to form an impulsive decline, then it needs a fourth and fifth wave.  But we simply don't know if it wants to form an impulsive decline.  If it wanted to simply form an ABC, then it counts as potentially complete.

The rally off yesterday's low was clearly impulsive, and I mentioned this to everyone in the forums before the close yesterday.  Outside of expanded flats, impulse waves do not occur in isolation -- so while this chart doesn't give us conclusive intermediate answers right now, it does suggest further upside in store over at least the near-term.

 
SPX has so far found support near the long-term uptrend line:

Let's take a look at NYA, which also suggests a near-term rally.

The one-minute chart for NYA shows a pretty clear extended fifth wave, and that suggests the market may form a complex double-retrace correction.  Though I did not detail that on the chart, keep that potential in mind for now:

COMPQ also highlights the importance of the current inflection point.

In conclusion, the market has progressed from intermediate predictable into "intermediate guesswork" territory.  Near-term, a rally is expected, due to the impulse wave off the low.  If that rally forms an ABC, then we'll know with higher probability whether to expect new lows.  If it becomes impulsive, we'll know to expect the rally to continue higher for at least one more leg.  Trade safe.

SPX, INDU: Ignoring the Bulls

I have to admit, after the long chop zone we recently endured, it's been a while since I enjoyed charting this market.  But I enjoyed charting it last night.  I think the charts are pointing to some high-probability options right now.

Let's start with the SPX 3-minute chart, because I think this points to two reasonably clear near-term possibilities, and this will provide perspective on the charts which follow.

The 15-minute chart provides some additional perspective.  To me, Monday's break of 1965 says that the odds are very good that this decline isn't over.

 

Next is the SPX 30-minute chart.  For now, targets here are unchanged, due to the expanded flat possibility noted above.  If the market begins to confirm the nested third wave as currently labeled, then targets will need to be adjusted lower.

 

Let's take another look at the expanded flat potential for a continued chop zone, via INDU.  We can't yet ignore the possibility that the market will chop around further in this price zone, as it has on more than one occasion already.  The upside for bears in the event of continued chop would be that it would form a more solid topping pattern.  The downside would be "much patience required" in the meantime. Sustained trade below SPX 1967 would make an immediate decline more probable. (continued, next page)

SPX and INDU: 1965 SPX Critical Support

Friday's move has simplified the charts a bit, which is always nice.  By all appearances, 1965 SPX has become critical support.  1991 SPX is still first important resistance, though decidedly less informative of the market's intentions if broken; whereas a breakdown at 1965 would suggest a solid decline of at least 30-40 points, with good potential for 55-65 points (or more) before a decent bottom.

We're going to start with the SPX 30-minute chart, which looks rather straightforward.  Before Friday's open, I hypothesized the upper boundary of the black trend channel, which ended up being right where Friday's rally stalled.  The chart is pretty self-explanatory, which (thankfully!) eliminates the need for 400 charts today.  I did draw up a couple more charts anyway, but only because I like you.

If the bearish 1-2 nest is correct, it appears that red wave 2 likely completed on Friday, at the black trend line.  And if this is indeed the case, then a strong decline is on deck.

One count that's not shown above is the potential that the decline to 1965 actually marks ALL OF wave (1)/A down, as opposed to a bearish nest of first and second waves (or the ABC).  I strongly considered that possibility on Friday, and berated myself this weekend for not discussing it, since that count would have anticipated Friday's rally.  I'm still awaiting the arrival of "thought-to-chart" software, which will allow me to simply "think-in" the trend lines and wave counts as quickly as I see them, without having to label everything by hand, thus allowing me to publish charts much more quickly.  The good news is:  I finally ordered that software last night.  At least, I think I did.  Depends on whether my "thought-to-anything-you-can-imagine" software was properly installed.  (I don't think it was, because I never did receive that pink chimpanzee with the face of Gilbert Gottfried, which I ordered well over a month ago.)

Anyway, next is an update to INDU's long-term chart, with a downside target noted:

A close-up of INDU reveals that, so far, all the rally has done is back-test the most recent breakdown:
(continued, next page)

SPX, NYA, US Dollar: Anticipation...

Wednesday's update was the most unabashedly bearish update I've published since late July, when I anticipated a correction to SPX 1899-1907 (exact target calculated August 1), which would be followed by new highs.

Speaking of, I want to reprint something from that update of August 1, because I think it may be relevant to the current market:

The point is that we can't force things; we should try to let the market come to us.  When it does, then we should go with the flow -- take what it gives us, and let the waves do their work.
It's in our natures to want more.  So we sometimes fight our way into positions that we know are ill-advised -- and then we fight our way out of positions when we know we should just let them ride.  But if you can master those two self-defeating tendencies, then your account will grow by leaps and bounds.  There will still be reversals of fortune, but they will come less frequently, and the increases will ultimately outweigh the reversals. 
I think trading attracts the ambitious, so I have to believe these are almost universal struggles for traders.  So your ambition got you into trading -- great.  Now if you want to keep trading, then you must learn to temper ambition with discipline.
It might help the ambitious to consider what a friend once told me: "You'll get more done in six days than in seven."  Meaning:  Sometimes the most productive thing we can do is nothing.
"Nothing" as in:  Don't force trades.
"Nothing" as in:  Leave your position alone once you're finally in that trade you wanted all along. 

I reprinted this because, by all appearances, the market is currently in a third wave decline, and many traders tend to leave money on the table during third waves.  Third waves are usually strongly-trending moves, and thus are best approached as trend-following waves, as opposed to waves where one tries to get too fancy.  Let's take a look at the NYA 30-minute chart to see why this wave could run faster and further than many expect.  It's not entirely clear-cut, but it is possible that we're in a third wave at two degrees of trend.  I can't say for certain.  But, in the event that we are, there will be a lot more downside in store rather directly.

Incidentally, NYA captured Wednesday's downside target.

A look at SPX shows that the market has broken down from its red base channel.  Nothing bullish can happen with the market outside that channel.  Please note that this does not necessarily make the inverse of that statement true.  In other words, the market can reclaim that channel briefly, then decline again.  But until it reclaims that channel, there's no reason for bears to even begin to worry.

We have an interesting confluence of Elliott Wave and classic TA approaching, which makes it worth paying attention to, especially since nobody on the planet can yet guarantee that this decline isn't simply an ABC.

And here's a bigger-picture look at that black trend line:
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NYA, SPX, INDU, COMPQ: "As Good as It Gets" for Bears

Last update noted that bears had an excellent shot at taking control of the market, and the subsequent sessions have gone well for bears.  The next couple sessions appears to be critical for bulls.  Let's get right to the charts, and we'll start with NYA, which again seems to be revealing the market more plainly than SPX or INDU.  Readers will recall that NYA suggested a bottom on September 15, and at the same time, revealed five waves down, which suggested a bounce toward 11,000, likely to be followed by new lows.

Presently, NYA has reached the first of two downside inflection points. 

If this is simply a corrective decline at a smaller wave degree, the market will likely bottom either directly, or at the blue 3/C on the chart -- this would complete the alternate count of 2 of (5).  If this is an intermediate bear wave, then NYA will instead ultimately go on to form a five wave decline (after blue 3/C, we'll have 4-up and 5-down), then it will bounce more significantly before declining again to new lows.  I'm favoring the idea that this is a bear wave.

A bigger picture look, via SPX:

COMPQ long-term:

COMPQ near-term (continued, next page):

SPX, NYA, INDU: Was Less than 1 SPX Point from the March Intermediate Target "Close Enough"?

First off, I apologize for the lack of an update on Friday.  My family has been the target of one crisis after another for about two years straight (with the targets running the gamut of generations, from my father to my kids), and it's something of a miracle that I've been able to manage anything even approaching a consistent series of updates throughout this time.  Maybe one day things will settle down.  Or, maybe one day things will get much, much worse, and I'll look back on these unfortunate events as "the good times."  Yikes.  (One reason why happiness can only be found in the present, though, never the future!)

Anyway, today's update is going to let the charts do most of the talking.

Let's start with my favorite master index.  Our special guest all this week, here from New York City, let's have a big Las Vegas welcome for the one, the only, the NYA!

(sound of crickets chirping)

Below is a slightly zoomed-in view, with some additional trend lines and support/resistance zones.  As I see it, NYA's pattern suggests that bears need to keep pushing, or risk at least another few weeks of hibernation, since a breakout here would keep the market pointed up for the foreseeable future. 

Let's take another look at some long-term charts.  On Friday, SPX came within 1 point of my intermediate target from March 5, 2014:

INDU effectively reached its target zone as well, though I would have liked to see a bit bigger overthrow of the red trend line (as noted on 8/22), here again INDU's high was well-within the margin of error.

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SPX, INDU, NYA: FOMC Day

On Friday, I wrote that my "gut call" was for SPX to decline directly, but that an immediate decline would offer "above average odds for a buying op."  By Sunday night, everyone thought I was nuts:  ES futures gapped down big at the Globex open -- and if the cash market followed suit, it was toast.  But despite that sea of red in the futures session, I nevertheless published the cash charts I had drawn over the weekend, and reiterated my stance that I felt the best fit for the pattern was for a rally to (at least) SPX 1997. 

Needless to say, by Tuesday, my gut call from Friday didn't look so crazy anymore.  Frankly, I was modestly surprised that I was able to triangulate any pattern at all from within the last month's chop zone, so you'll have to forgive me for that little bit of horn-tooting.

The question now, of course, is whether this rally presents the selling op I believed it would when I wrote Monday's update.  The market is a dynamic mechanism, of course, so it's important that we assimilate new information as it becomes available.  The one key piece of new information is that the Dow Jones Industrial Average Ordinary Mediocre Average (INDU-OMA) exceeded my rally target and made new all-time highs.

I studied the pattern in INDU last night, and after a while, I finally came to the firm conclusion that I should stop and walk away before I went insane.  INDU's chart looks like it was drawn by M.C. Escher.  Almost every pattern I could find not only violated rules and guidelines of Elliott Wave, but also violated the fundamental laws of physics.  INDU's chart is an abomination, and I highly recommend we start a movement to burn all the INDU charts before this thing spreads to other markets.

I'm kidding of course.  I found a few patterns that made sense, but they're so complicated to chart (and make understandable for public consumption) that by the time I labeled everything, it wouldn't matter, because the sun would have burned out by then, and no one would care about equities anymore.

It's interesting how often the market works its way into complex types of patterns heading into FOMC announcements, which makes sense.  After all, the Fed is one of the main drivers of asset prices in what used to be known as our "free market" -- back in the day when bizarre and archaic concepts such as "productivity" and "supply and demand" impacted asset prices.  The term "free market" has taken on a different meaning in recent years, and the Fed's motto since 2009 has been: "We put the FREE in Free Market."

Anyway, it's time to look at the charts, and we'll start with SPX.  I am still leaning toward this being a complex flat, with some additional details in the annotations.

COMPQ failed to act as a canary for anything other than COMPQ, and with prices at current levels, doesn't do much to aid in additional clarity.

However, NYA again proved to be exceedingly helpful:

(Note typo:  "botom" should read "bottom."  A "botom" is not something you'd find in the market, but was instead a medieval weapon that was used to punish insolent serfs.  Or it should have been, anyway.)

 
Big picture, not much has changed during this extended chop zone:

In conclusion, a bit more upside wouldn't be out of the question here, but I do continue to marginally prefer the idea that upside is limited at current levels, and that Friday's low will be broken reasonably soon.  However, if bulls can sustain a breakout over the all-time high in SPX, then we'll have to give more weight to the idea that the chop zone was simply a consolidation period.

Do keep in mind that the market sometimes likes to head-fake near FOMC announcements, so stay very alert to reversals today.  Trade safe.