SPX, Nasdaq, and NYA Updates: NYA Faces Intermediate Test

There's really not much to add to the outlook since yesterday, so this update is going to be on the short side (no pun intended).  Unfortunately, I just can't invest 20 hours into writing and charting every single day -- if for no other reason than the fact that, after a mega-weekend-update like yesterday's, I simply run out of new and interesting stuff to talk about.  This update builds upon that, so for more perspective on the intermediate term, please refer to yesterday's article.

One chart I'd like to revisit briefly is NYSE Composite (NYA) daily chart.  This is a very broad-based index which is almost never mentioned by the mainstream media -- NYA covers all the common stock in the NYSE, and I like to track it because it's a much better representation of the total market than, say, the Dow Jones Industrial Average (INDU) which consists of only 30 large-cap stocks.  NYA consists of thousands -- and it has yet to best the highs of 2011. 

I called attention to this chart on August 13, and suggested at that time that higher prices would fit the pattern over the short term -- and that's what's happened. 

This pattern has a very triangular appearance, which sometimes suggests the first breakout will be a fake-out move that reverses.  In any case, that's a bit ahead of the game -- currently NYA is approaching the blue intermediate down-sloping trendline, and thus is now facing a test of intermediate resistance.

Nasdaq has reached the targets I mentioned at the beginning of August, but still looks like it has some more upside left.  The final sentence ("the next target is from here to 3100") was added today.

A very short-term chart of the S&P 500 (SPX) also suggests the index will probably take a stab at least somewhat higher, and I have drawn-in a speculative short-term ending diagonal pattern (it's speculative because there's yet not enough price info since the 1412 swing low to make a more definite call). 

My second preferred option, only barely shown on this chart (in black), is the potential that this is a bullish nest of 1's and 2's, which would lead the rally into the 1425-1430 zone.  Unfortunately, there's really no way to tell the two patterns apart until the market starts moving again, so I've outlined some levels to watch.  Both potentials suggest higher prices immediately over the short-term, but the larger wave count suggests this should be the final upthrust.  It goes without saying that bulls do need to clear the 1418.71 level first.

In conclusion, the market has reached all the targets discussed earlier this month, but the short-term direction still appears to be "up."  The intermediate interpretation I'm currently favoring has the patterns quite close to reaching culmination, but please remain cognizant that I'm going out on an analytical limb here and trying to nail down an intermediate turn before even the slightest sign of a turn actually hits the tape.  This is pretty much the toughest job in market analysis, so I could well be wrong (or at least off by a few points).  Obviously, if the bulls instead stampede right over all the sell signals which have triggered recently, then all we can do is try to adjust accordingly.  Trade safe.

Reprinted by permission; copyright 2012 Minyanville Media, Inc.



Current VIX Trend Line Has Marked 5 Consecutive Intermediate Tops

The bottom line with this market right now: there are plenty of sell signals, but price is not yet showing any weakness.  I can't overstate how challenging this is making the work of projecting the market's next move right now. 

I've been wrestling for the words to express what I'm seeing, and the best I can come up with is as follows: 

Since the number of sell signals is actually increasing as price strengthens, somebody's lying.  Either the signals are lying, or the rally is.  These signals began firing off after the S&P 500 (SPX) reached 1407, so for the moment, I'm continuing to run with the outlook that the rally is not going too much higher.   

Since the SPX reached the 1325 swing low in early July, my preferred short-term outlooks have, for the most part, managed to anticipate higher prices when appropriate, and thus have captured the majority of this rally to date.  Right now, I'm working overtime trying to decipher this market, because I don't want readers to miss out if the sell signals are actually the liars and the rally ends up growing legs from here. 

All investing is simply speculation -- and as always with the game of speculation, we are dealing only with odds and potentials. The signals suggest the odds are above average for a top to occur soon (in terms of price), and my research suggests that the current price zone would make an excellent potential turning point -- so, from an intermediate standpoint, I remain cautiously bearish at the moment.  Let's discuss why. 

The Signals

There are two new charts to add to those published previously.  Since I don't want to take up too much space publishing repeats of the same signal charts, I'm going to update two of them in written form, with links to the most recent articles in which those charts were published (below): 

1.  The Nasdaq total volume ratio to NYSE total volume has finally backed down from it recent all-time high reading of 3.24, registered on August 16.  On August 17, it dropped to 2.4, leaving a nice spike high in its wake -- which is often a good sell signal in and of itself.

2.  The VIX:VXN ratio has now reached a new low of .73, the second lowest reading of all time.  I mentioned this indicator on August 14, when it was at .76.  The all-time low of .71 was recorded in March 2012, slightly ahead of the SPX print high which rolled into a 10% decline this past spring.

Additionally, there are some new signals to examine.  The first is a 5-year chart of the Volatility Index (VIX), which has reached an important support line.  This current support level in VIX has marked five consecutive intermediate tops in SPX, going back to 2007 -- though it has sometimes led the turn by a few weeks (which would seem like an eternity in this market).

 

The next chart examines some signals in the put/call ratio (CPC), which also works as a sentiment indicator.  For new traders, the concept of tracking (and betting against) sentiment is called "contrarian investing."  The basic idea is that stocks are driven by the simple concept of supply and demand, and the more investors are bullish, the less buyers are left in the market.  Conversely, the more investors who are bearish, the less sellers remain.  No buyers = falling market; no sellers = rising market.

This chart below is based on my own buy/sell signal indicators, which I've structured around the weekly put/call ratio.  This chart reveals a decade of prior history for this indicator, and one can examine the chart and see that a cross of the sell signal line (represented by the dashed red vertical lines) almost always triggers an equities correction at the minimum.  Note that, unlike the VIX chart shown above, this is not necessarily an intermediate sell signal.  However I felt it was worth sharing, because the current put/call readings, just like the VIX readings, indicate there are high levels of bullish sentiment present in the market. 

Past performance is never a guarantee of future results, and bulls will feel brilliant if all the sell signals fail -- but I am currently unable to bring myself to become "brilliant" enough to ignore market precedent.  Combined with the potential of a double top near 1422, which I'll discuss in more detail shortly, I think one has to heed these warnings.


The Price Charts

Last week, the Russell 2000 (RUT) crossed my bullish buy trigger at 808.53 (this has been a standing buy trigger for several weeks), and on Friday it easily captured the trigger's 818-820 target.  The larger pattern here is still a mess, and almost impossible to decipher at the moment.  Now that the short-term target has been captured, I simply have to take a "wait and see" approach to this chart; two trendlines are noted which may help with short-term direction.

The S&P 500 (SPX) has also rallied into the short-term target zone, and is another messy chart.  Both SPX and RUT continue to look like corrective rallies since June, which suggests that lower prices will be the ultimate outcome -- but as mentioned, price has been reaching upside targets, and has not shown any weakness so far. 

A short-term chart of the SPX reveals that this rally leg has good odds of wrapping up soon.  The appearance of a triangle in the fourth wave position helps confirm that the up-thrust is nearing completion.

A weekly chart of SPX reveals the potential for a double-top.  On July 3, I asked whether the market needed to retest the 1422 zone, and the market has since answered.  Now the question of course becomes how the market will respond to this retest of the prior highs.

Since I'm discussing the double top pattern, it's relevant to outline exactly what that pattern is.  It's also important to understand the difference between a double top, and a pattern that has the potential to become a double top.  I've been attempting to remain cognizant of the fact that the experience level of my readers varies significantly, so I hope the veterans will forgive me for stating the obvious here:  Right now, this pattern is a potential. 

So what are we looking for to help confirm or rule out a double top?

First off, a "double top" does not need to be to-the-point on price; so (similar to the term "retest") it's more of a zone that ranges slightly above and beneath the previous high.  The majority of technical analysts consider this zone to be plus or minus 3% of the previous high; note on the chart below that the 2000 peak was a lower high, but 2007 was a higher high.  

Another confirming factor for the double-top pattern is volume:  volume should generally be higher on the first leg up than on the second leg, and so far that's been the case here.

The corrective appearance of the rally suggests that odds are above average for a double top, but as always, we'll need to see how the market responds to determine if the pattern has validity.  The first step would be a solid reversal coming from within 3% of the 1422 print high.  In classic technical analysis, the pattern is not considered to be "confirmed" until 1266 is broken (and ideally, retested from below); which illustrates one reason I don't rely solely on classic TA.

Looking down the road, if bulls can break out of the possible intermediate double top, the next challenge they'll run into is the potential for an ominous long-term triple top in the 1500's.

Next is a chart of Amazon (AMZN), and I'm calling attention to it because the present appearance of the price structure on this chart makes Amazon an excellent candidate for a potential double top.  The rally since December appears very corrective.

Bonus Chart

Finally, I want to share a proprietary chart courtesy of my friend Lee Adler at the Wall Street Examiner.  The chart is pretty self-explanatory, and I find it intriguing.  Fed cash to Primary Dealers has basically tripled since 2007, and this herculean effort has almost bought the market back up to the 2007 highs.  The chart seems to illustrate the diminishing returns of each successive QE program, and the question this chart begs is: where would the market be today if left to its own devices?



In conclusion, prices are still in the projected turn zone, and the number of sell signals is increasing as prices seem to strengthen.   

As I stated several weeks ago, this type of top is a process, not an event.  If the overall outlook is correct, then that process should be approaching completion in terms of price, if not time -- and, assuming the sell signals aren't lying, then we should see some price confirmation relatively soon.  The bottom line is: if this turn is going to happen, then we should be pretty much "there."  Trade safe.

Reprinted by permission; copyright 2012 Minyanville Media, Inc.

SPX Update: Bulls Feeling Invincible

In yesterday's analysis, I suggested that the market was finally ready to move out of the two-week trading range.  The market obliged; and in the process reached the next short-term preferred target of 1415-1421, which was published on Tuesday. 

The market is now in the zone for a potential double-top with 1415-1422 -- and many metrics are indicating that sentiment is more than a bit frothy, which usually suggests that some type of correction lower is due.  In fact, the Nasdaq total volume to NYSE total volume ratio reached a second consecutive all-time high on Thursday. 

Again, the reason this indicator generally works is because it indicates that investors are pouring relatively high amounts of money into the high-beta Nasdaq vs. the "safer" NYSE.  This suggests that traders are feeling rather invincible on the bullish side of the trade, and are essentially throwing caution to the wind.

We're getting into the territory where one has to ask themselves how long these types of readings can continue, but the challenge I'm seeing is that there aren't currently any real signs of weakness in the actual price action.

Next is one of my proprietary sell indicators (though I've shared it previously, so it may have made its way into the public world by now).  This is a ratio of the Nasdaq 100 (NDX) to the Dow Jones Utility Average (UTIL).  It operates in a fashion similar to the chart shown above, though its signals are much less frequent.  Over the prior decade, it's been 80% accurate at finding short-to-intermediate-term tops, with the only signal failure coming in late 2003. 

Note the last time this indicator issued a sell signal was at the end of February, which hit the short-term top well, but led the intermediate-term top by a month.

The Preferred Outlook

Based on numerous signals such as the ratios just discussed, I remain in favor of the view that an intermediate top is under construction.  It's not always possible to call intermediate turns within a few points; so I obviously can't be certain if the assumed turn will come from within my 1415-1421 target zone -- but that would be the perfect world scenario.  In a moment I'll discuss the "but what if no turn comes" outlook.

 

Daily chart of the Dow Jones Industrials (INDU):

A brief discussion of the short-term SPX on the chart below:

An Alternate Outlook:

The outlook shown above hinges on what happens over the near term.  If the 1422 resistance level is claimed, then that will eliminate certain potentials, and when trying to anticipate the pattern in advance, one has to recognize when the market dictates that it's time to evolve.  The outlook shown below only becomes a consideration if the more bearish pattern shown above is invalidated. 

If the 1422 level is solidly claimed in the near term, then that suggests a different pattern (than the one shown above) is unfolding, and the outlook below attempts to anticipate what that pattern might be.  This path still suggests an intermediate top is close in terms of price, but the pattern below would be more near-term bullish and would allow the time component to stretch out for several weeks (or longer).

Again, this pattern is being shown in advance, but it is not a consideration unless 1422 is solidly claimed by the bulls.

In conclusion, a high number of sell signals have triggered recently, and these are causing me to continue favoring a bearish intermediate-term hypothesis, which further suggests that price is now in the turn window.  Sometime in the reasonably near future, we need to see some price confirmation to add confidence to that hypothesis.  Trade safe.

Reprinted by permission; copyright 2012 Minyanville Media, Inc.

SPX Update: Beta Chasing Reaches Historic Highs

This remains one of the more challenging patterns I've seen in a long time.  Every type of trading system runs into challenges at times, and all the technician can do at such times is make a hypothesis, then back off a bit and see how the market responds.  Based on numerous indicators which have issued sell signals recently, I've made the hypothesis that the market is forming an intermediate top.  Now it's up to the market to either prove or disprove this hypothesis.

The first indicator I'd like to share is one that I've shared fairly recently: the Nasdaq total volume to NYSE total volume ratio.  This ratio has now reached an all-time record high, and this suggests that investors are chasing beta -- which indicates that sentiment is very bullish.  Extreme bullishness is often seen at the end of rallies:  when everyone's bullish, who's left to buy?

The next chart is one I studied for a few hours last night: it's the ratio of the S&P 500 (SPX) to the iShares Barclays 20-year treasury fund (TLT).  What I found is that divergences in this ratio often coincide with meaningful turns in equities -- and over-bought readings in RSI here seem to lead, or coincide with, market tops. 

There isn't enough history behind this indicator for me to be certain what the huge year-over-year divergence that formed between the 2011 highs and the 2012 highs means (TLT hasn't been in existence long enough), but it seems to suggest that a more meaningful turn could be underway.  There is also a divergence forming with the present market and the 1415 print high.  In any case, I felt the chart was worth sharing -- feel free to draw your own conclusions. 

Note the potential head and shoulders forming since the 2011 low.

 

The next chart is the SPX 30-minute, and the outlook here has remained essentially unchanged for several weeks.  In the last update, I suggested that higher prices were probable over the short term, and this occurred on Tuesday -- however the market fell short of the target of 1415-1421.  The short-term wave structure is entirely unclear, and I simply don't know if that target will be reached or not.

In either case, I do strongly suspect that the chop of the past couple weeks is nearing an end, and that the market is finally ready to break away from this narrow trading range.  I expect the market to begin a direction move within the next couple sessions.

Next is a 5-minute BEST GUESS.  A number of readers have asked me to provide these, and I'm applying a slightly different wave count to this structure vs. the last 3-minute chart I published, because, quite frankly, the short-term is a complete toss-up.  This count considers that this whole sideway/up wave is a small ending diagonal.  In a perfect world, I'd prefer to see the (ii)-(iv) trendline unbroken -- but hey, it's not a perfect world.

The question is still whether (5) is complete or not.  Keep in mind that if the overall outlook is correct, then an intermediate top is forming, and we simply may not be able to figure out the to-the-penny high at this stage.

Next is the same chart without the speculative count.  Many short-term traders will be watching only the lower red trendline, but the blue channel has been established with four alternating touches, so the first step toward short-term control will come with a breakout or breakdown of that channel.

In conclusion, I continue to feel that the number of meaningful top signals here must be taken seriously.  The funny thing is, though these indicators have worked well historically, I've been conditioned over the past couple years in this QE Wonderland market to doubt these readings.  Be that as it may, I feel the historic odds require that I continue giving preference to the idea that an intermediate top is under construction.  And if my hypothesis is correct, the move should finally be nearing completion.  Trade safe.

Reprinted by permission; copyright 2012 Minyanville Media, Inc.

SPX, INDU, and VIX Updates: Dow in a Turn Window; VIX Suggests Complacency

When I first glanced at Monday's charts, I thought I would have nothing to add to the prior update -- however, upon closer inspection, there are a number of interesting things to share.  I'm going to keep the commentary brief and focus on the charts today.

The first chart of interest is the VIX:VXV ratio, which I've mentioned on several occasions in the past.  This ratio measures the Volatility Index (VIX) compared to the 3-month Volatility Index (VXV).  In the past, this has worked well as an indicator that VIX is bottoming -- and usually when volatility finds a bottom, it means that equities are finding some type of top.

Note this ratio is currently showing its second lowest reading of all-time -- the lowest reading was in March of 2012, as noted.  This suggests that there's again a very high level of complacency among investors.

The next chart shows two time-cycles which the Dow Jones Industrial Average (INDU) has been responding to since the 2009 bottom; I stumbled upon these cycles quite by accident earlier this year.  Note the cycle shown in blue has reached its turn window; and most prior windows have marked decent turns -- including the 2011 top and October bottom.  The red cycle window last opened near the 2012 top, and won't reach another window until November. 

The next chart is a 3-minute chart of the S&P 500 (SPX) and shows that the sideways move of the past week-plus may have finally reached completion.  The move is still very messy, but the primary count suggests that the correction is complete and the market should move higher over the short-term.  Trade beneath 1395 would invalidate that short-term outlook.

The 30-minute chart still remains essentially unchanged since August 3, but adds perspective to the 3-minute chart above, and outlines some signals to watch.  I'd still like to see the market take a stab at higher prices here; though significant breakouts would negate the bear case for the moment.

Finally, a simple chart of the US Dollar.  On September 3, 2011, I turned long-term bullish on the dollar, but recently, on July 26, I switched from bullish to neutral.  I'm still neutral, and in watch-and-wait mode here -- so the chart outlines what I'm watching at the moment.  Interesting that the dollar may be completing a bullish falling wedge concurrent with SPX completing a bearish rising wedge.

The challenge remains that this pattern may not be a wedge, but a wind up to as stronger continuation move -- so it bears careful watching in both USD and SPX.

In conclusion, unless nothing bearish works here, there continues to be additional evidence that a top may be under construction.  Over the past week or so, I've outlined a number of signals which, on most past occasions, have been precursors to topping markets.  In addition to the signals mentioned today, two other recent signals include the ratio of Nasdaq total volume to NYSE total volume (now historically very high); and the concurrent new 50-day highs in TNX and SPX.

Of course, the last time the market generated this many top signals was late-January 2012, and it ended up marching right through them.  Nothing works with 100% accuracy, and these signals are based on the fact that they've performed well in the majority of past occasions; so it would be foolish to simply ignore them.  Of course, as I've said before: price is the final authority.  So while it appears higher prices are probable over the short-term, for the moment, I remain cautiously intermediate-term bearish.  Trade safe.

Reprinted by permission; copyright 2012 Minyanville Media Inc.

The S&P 500 is Close to a Once-in-a-Lifetime Signal

In this article, I'm going to focus on the long-term.  I'll discuss the generational nature of a certain signal shortly.

First, let me make one thing clear:  I don't like this market one bit right now.  Usually I can look at the charts and get a good feel for the market on either an hourly or daily time frame -- but for this past week, I haven't felt like I have a definite grasp of anything other than the shortest time frames.  I've been limiting my personal trades to the one-minute and three-minute charts, and haven't held any trades longer than a few hours recently.

I view the current price territory as something of a no-man's-land: the market is currently beneath long-term resistance, but above short-term support.    At times like this, we have to look at other signals besides price; the challenge is that price is the ultimate authority, and other signals are always hit-or-miss... and even some of those indicators are giving mixed messages.  I can't tell exactly what the market's going to do next here; all I can do is assemble the evidence, look at what's happened in the past, and then try to draw a reasonable conclusion. 

The short-term trend is up, and the long-term trend is up. So why be anything other than bullish?  Well, there are numerous signals which, in the past, have been precursors to bearish markets.  Accordingly, I'm going to continue warning of the intermediate bear case unless those signals negate.

And there are no guarantees that these signals will work.  If you're the type of trader who marries their position, or has a hard time (emotionally) with missing a move that went in the direction of the previous established trend, then just follow the trends and don't try to anticipate turns -- anticipating turns is extremely difficult and higher-risk. 

Of course, trading only the trend has its disadvantages, too -- but whatever we didn't do always seems brilliant (in hindsight) any time the actions we took don't work out.

At times like this, it pays to remember that one doesn't need to always be either bullish or bearish.  It's a mistake to think those are the only two options in trading -- in fact, believing one should always be either bullish or bearish is a sure-fire way to lose money fast, because it leads to over-trading when the market is ambiguous.  Cash is a position, too, and successful trading is as much about patience as anything else.

Smart traders will sometimes lean bullish or bearish and take a stab because there's a clear bull/bear battle line, and the risk/reward is good -- but they're also quick to exercise discipline and close the trade if it isn't working.  If a trade doesn't work, never get mad about "missing a move" -- getting stopped out means you did something right, not something wrong -- and as long as you continue making disciplined and well-reasoned trading decisions, you are acting correctly.

Last week the market did basically nothing, and I've been excluding the short-term section of the updates of late, because I haven't felt there's a clear short-term direction... and I suppose, given the meandering nature of the past week, that my read has actually been correct.  The market may drift around a while longer -- it appears that numerous forces are working at cross-currents to each other right now.  As I said last week, this type of top is a process, not an event.  Of course, with that statement, I am presupposing that this is a top, and that the current signals won't negate.  A solid and significant breakout would suggest bulls are still in control.

I'm going to continue limiting focus on the short-term until it clarifies again.  Instead, let's look at some of the intermediate and long-term evidence and signals.

The SPX monthly chart shows a rare event that I've been keeping my eye on for a while:  the pending potential cross of the 50 month and 200 month moving averages.  It's fair to call this signal "once in a lifetime," since these two moving averages haven't crossed on SPX in over 66 years (they last crossed upwards, in April, 1946).  When they cross downwards, this is commonly called a "death cross" and considered a bearish signal -- but before bears get too excited, it calls for some discussion.

While this signal hasn't actually happened in SPX for 66 years, SPX did come very close in 1978.  This was at the tail end of the long secular bear market of 1966-1982.  I say "tail end," but this is of course relative, and it was still 4 more years until the bear market actually ended.  This monthly death cross happened a couple years later in the Dow Jones Industrial Average (INDU), in August of 1980.  The INDU then crossed back up (called a "golden cross") in April 1982.  However, in both those death cross instances, the bear market wasn't over -- and while we can look back and say it was near the "end" of a secular bear market, two to four years is still a pretty long time by the standards of most investors.

The Dow also experienced a monthly death cross during the Great Depression, in January of 1934; and the moving averages didn't cross back up until February 1946.  There's no argument that this was a useful long-term signal at that time.

And then there's Japan.  The Nikkei (NIKK) experienced a monthly death cross in early 1998, when the index was trading near 17,000.  This cross is still active -- and the Nikkei is currently trading almost 50% below the signal level.

So while this signal is so incredibly rare that we have limited historical evidence to draw from, the past history suggests that it's a bearish signal for the long term.  But, as the famous last words go, maybe "this time will be different."

The next chart I'm going to share discusses another recent signal that tends to be a top precursor. Last week, ten-year bond rates hit a 50-day high, as did the S&P 500 (SPX). The last time these two things happened together was March 13, 2012 -- and before that, October 27, 2011.

Note that this signal led the top in March by several weeks.  While not quite as long-term as a monthly death cross (what else is?), this is still an intermediate signal, so it doesn't mean the market's necessarily going to collapse tomorrow -- it just increases the odds that an intermediate top is under construction.

The next chart is the SPX daily, and discusses the next resistance levels, should the bulls break through 1407.

Next is the NYSE Composite (NYA), and I find the current fractal interesting for its similarity with 2010-2011.  The fractal here does suggest more upside is possible before a significant turn.

Trying to fit an Elliott wave count to the current charts is still an exercise in patience/frustration.  This chart shows one of the mixed-message signals -- as I mentioned on August 5, the breakout and backtest of the blue trendline can't be viewed as anything but bullish.



Finally, my best guess at the short-term.  This chart is materially unchanged since August 3rd, when I suggested an ending diagonal as a potential resolution to the present move.  I suspect the market might need to test higher prices eventually (not necessarily immediately) -- though as long as the bears hold 1407, there is always a chance that level ended the wave.

Of some note, with Friday's close, the SPX had 6 positive closes in a row.  When this happens, there is a 70% chance that the 7th close will be negative.

In conclusion, I'm effectively neutral on the short-term.  I remain cautiously bearish on the intermediate-term -- however, the market's behavior in late 2011 and early 2012 is still fresh in my mind.  During that time, the indicators repeatedly gave signals which were historically bearish, but the market ignored them and kept marching higher anyway.  As a result, I'm still hesitant to suggest anything but caution on either side of the trade.

On a lighter note:

In weekend Olympic news, the United States beat Spain on Sunday to win the gold medal in Men's Basketball.  At the press conference which followed, Fed Chairman Ben Bernanke stole the show when he revealed that the Fed "is standing by and has all the tools necessary to obtain gold medals for each and every U.S. Olympian" -- provided that nobody cares if all the gold content is replaced with paper. 

Later Sunday evening, Former MF Global CEO Jon Corzine announced that he had officially won the Fed's first "gold" medal -- in the challenging and aggressively-competitive category of Creative Accounting.

Trade safe.

Reprinted by permission; copyright 2012 Minyanville Media, Inc.

SPX Update: Little to Add...

Yesterday's flatline market added little in the way of clarity to the intermediate picture, and I debated not even publishing an update tonight.  There's been no material change from yesterday. 

I took a SWAG (Scientific Wild-@ss Guess) at the short-term structure; there's honestly no clear interpretation.  I'm slightly favoring the view that this structure leads to at least a short-term breakdown -- but it's simply going to take a directional break to clarify this move.

The wave from 1405 to 1398 appears impulsive.  The challenge is: this could fit a number of different corrective structures, including an expanded flat from 1404 (can be ruled out below 1398.8) -- or the a-wave down of an ongoing triangle (noted by the "or c" annotation on the chart -- can be ruled out beneath 1396). 

Unless this is a running triangle, 1396 is the line in the sand for the triangle count.  

So... after an ambiguous session that traded within a 7 point range in an ambiguous market, there's just not much to add here.  Trade safe.