SPX, TLT, INDU: Still "Just a Correction" Until Proven Otherwise

Tuesday saw continued downside -- and as I warned in the last article, bulls indeed "dropped the ball" for the near-term.  Currently, it's expected that this is only an extension of the correction from the 1474 pivot high, and that it will ultimately resolve higher over the intermediate term.  Bears do have a shot to turn the decline into something more meaningful, but will need to force a decisive breakdown of support to begin shifting intermediate prospects to their favor.

The S&P 500 (SPX) trendline chart below highlights a pivotal confluence zone, which crosses 1425-1430.  The chart should also note 1453 as a bear warning level.

It appears reasonably likely that the market will test this zone before this wave is complete.  Keep in mind, however, that bears do not particularly want to see overlap with the blue wave (1) low (chart below) in the near term, since this would imply a potential for new swing highs more directly.

We can count a clear five-wave decline, which means the decline has already completed the minimum expectations for a (c) wave, and as such isn't required to head lower.  Lower would be more "normal" though, so on the chart below, I've positioned the (3), (4), and (c) labels to reflect the roughly-expected path of a typical (c) wave.  A choppy sideways/up mess is the usual for wave (4), which could start quite soon.

 

The Dow Jones Industrials (INDU) outlines the two most likely prospects -- however, as long as the swing low of 13425 remains intact, this leaves additional bullish options (not shown) on the table, and trade above the key short-term overlap levels outlined on SPX and INDU would suggest a more directly-bullish resolution.  Larger degree prospects for SPX are essentially the same as shown on the chart below...

SPX, NDX, INDU: Did Bulls Drop the Ball on Friday?

Bulls had every opportunity to get things done on Friday, but failed to push higher on the better-than-forecast job report.  The market performed properly for the very short-term count, but not quite as-expected for the next higher degree wave count.  Certain corrective waves can only be anticipated in real-time, since they sometimes form a complete fractal (which leads one to believe they are over), but then go on to string together a couple more fractals before actually finishing.

Near-term prospects may now be shifting into the bears' favor, so I've outlined a series of key levels to watch on the S&P 500 (SPX).  Be aware that until 1450 and 1439 are claimed by the bears, we can't rule out new swing highs following directly, and trade back above 1471 from here would suggest bulls have several more sessions of strength left in them -- if not more.

Due to the fractal nature of Elliott Wave, this pattern leaves a number of potentials open at the moment, so let's take a look out across a couple more markets before coming back to SPX.

The Dow Jones Industrials (INDU) is suggesting that -- again, assuming new highs don't follow directly -- the current wave is (at worst) part of a larger correction, and new swing highs should ultimately follow.  Depending on what happens next regarding the important price levels, though, bulls may have to wait a while and endure some drawdown if they're not nimble.

As I mentioned last week, a number of markets appeared to be running at cross currents.  NDX is one such market, and has been much weaker than INDU and SPX (chart below)...

SPX and TLT Updates: Bonds Showing Signs of Trouble

Yesterday's update expected more upside, and the S&P 500 (SPX) indeed extended its rally.  I continue to favor the view that the decline completed at 1430, and that the market is headed to 1490-1500 next.  Today has the potential to make or break that view -- this is probably the bears last chance for at least a little while, and they can ill-afford further upside here.

This is the type of market I like, since there are now a number of fairly clear and actionable levels.  The two-minute chart below details those levels; I continue to feel this will end in the bulls' favor, but breaks of the key levels outlined could shift my short-term expectations.  Note yesterday's trip to the top of the black base channel.  If my preferred bullish view is off and bears are instead going to turn things around, this is the zone where they'll do so.

Stepping back just slightly to provide more perspective. 1463 and 1467 are the levels where bears run out of real estate for this wave.

Moving out to the daily chart and the next preferred target zone:

The NYSE Composite (NYA, chart below) is also not showing any real signs of weakness yet...

SPX and NDX: Trend Still Your Friend?

No material change since yesterday.  Yesterday's outlook expected higher prices, which is what happened, and I am still in favor of the view that this consolidation will resolve with new swing highs.  How much higher is a bit up in the air at the moment, so we'll have to play it by ear for now and simply try to keep pointed in the right direction.

As mentioned in prior updates, a break of the S&P 500 (SPX) level of 1430 is required to shift prospects to bearish.

Yesterday's short-term count performed properly, and as mentioned, 1430 remains the key level for bears to get anything started.  Note I have updated the pending bearish sell trigger -- applicable only if bears can claim the falling red trendline.  A 17 point bullish buy trigger has also been added.

The alternate count, depicted in gray above, is detailed on the daily chart below...

SPX and INDU: Bulls Will Stay in Control Unless Bears Take 1430

Last night I studied a great number of charts, and found that there are several markets which are running at cross-currents.  Investors seem a bit confused. 

Because of these cross currents, I'm going to keep today's update fairly simple.  The bottom line is: This is still a pattern that can go either way.  After debating a number of factors, it appears that unless bears can break SPX 1430, the bulls remain in control. 

Two short-term alternate counts for SPX are shown below:

 

The hourly chart of the Dow Jones Industrials (INDU, below) shows my big picture preferred count.

INDU, SPX, TLT

There's been no material change to the big picture outlook discussed on Thursday: the market has left its options open, but appears to be at an inflection point.  Since there's not much to add to that discussion, I'm going to focus primarily on the near-term charts for this update, with the exception of the Dow Jones Industrial (INDU -- below).

INDU looks at the key intermediate levels, and some possible Fibonacci targets.  Bears would need to force a breakdown of critical support in order to start favoring a more bearish intermediate outlook.  This is a tough wave to count, so while the invalidation level for the sub-minuette count is noted, this level wouldn't be a dagger through bulls' hearts. 

The next chart highlights some key near-term levels for the S&P 500 (SPX):

Intermediate Market Prospects Remain Open

So it's "that time" again, when the bears start getting loud -- how the market environment can change in a week!  The bottom line, though, is that nothing's cut-and-dried yet from an intermediate perspective. 

The market hasn't done anything to prove itself one way or the other here, and the long-term counts are simply going to require a bit more clarification from the market.  While many Elliotticians are viewing S&P 500 (SPX) 1426 as the "end-all" to ruin all future bull prospects, 1426 is simply the first warning level, and trade beneath that level would not guarantee a bearish long-term outcome.  The chart below shows why.

Something that remains bothersome to the immediate bear prospects is the fact that RSI and MACD both confirmed the 1474 high, and it's rare for the market to form a long-term peak without some type of divergence forming first -- not impossible of course, but unusual.

While we're at it, let's look at the count which has the bears claiming victory.  The pattern below is called an ending diagonal, and to my knowledge, I was the first to propose it, many months ago.  This pattern can't be confirmed yet, though the whipsaw of the upper trendline is a good start.  In any case, I'm continuing to track it, and am watching the market's behavior before putting all my eggs in one basket.

 
Over the short-term, the prospects for both counts remain viable.  The market has simply not declared its long-term intentions yet, and the first step for bears would be to complete a five-wave impulsive move to the downside.  In order for this to happen, it would take a low toward the (3)/c level, followed by a reasonable bounce and then another new low to begin to consider the decline impulsive, which would suggest a major trend change.

Some key short-term levels with larger-degree implications are noted on the chart below.