SPX and BKX: November Targets Captured

Well, November's 2400 target was finally captured, good for about 200 points of profit.  Amazingly, it was captured to the point -- and shortly thereafter, SPX suddenly dropped like a rock.  Bears undoubtedly want to know if we're "there" yet, and the chances are that no, we're probably not.  However, a decent near-term correction can't be ruled out.  I'll let the charts take it from here:

A closer look at SPX:

And an update to BKX, which has also captured its first November target zone.  Here again, we can see that the waveform would look better with at least one more 4 and 5... possibly more (from a larger perspective):

In conclusion, SPX and BKX have both captured intermediate target zones, and the market reacted.  We could see a near-term correction now, but odds are good that the bull market is still underway in the bigger picture.  That said, we'll keep an open mind to all options for the moment, and do our best to react appropriately if the market dictates that we need to.  Trade safe.

SPX Update: Rally Continues on Important Hair Ban

No material change from last update, except to add a few notes:  It appears wave (4) was indeed complete, and the current wave does seem to be subdividing.  The near-term chart below contains the details, along with the addition of Target 2:

Whoops, wrong chart!  Here's the chart I thought I was posting:

Long-term, there's still no change, which, although boring, is a good thing because it means there have been no big surprises for my readers:

In conclusion, it appears the market rally will continue due to the recent "Nice Hair" ban, which is as good an explanation as any that the major media outlets ever offer.  I would have said it's rallying because we're in a third wave and that's what third waves do... but what do I know.  In any case, for Pete's sake, do something to screw up your hair before you get hauled off to jail.  Trade safe.

SPX Update: Market Pulls a Little "Gotcha!"

We just saw an interesting near-term pattern unfold, one which often fools both novice and experienced Elliotticians alike.  What I believe we just saw is shown below, and it often confuses people because the fifth wave did not exceed the b-wave highs, although it did exceed the third wave high, which is all it's "required" to do:

The question is whether blue (4) is complete yet or not.  If it is, then we're likely only about half-way through blue (5), so we would be looking at 2379-83 as the next target.  If the rally stalls here and reverses, then blue (4) may become more complex.  In the event 2353 fails, then we'd watch the 2343-48 zone for a potential (4) bottom.  Do be aware that since this is a fourth wave at higher degree, it can run lower than that zone if it wants, and the invalidation levels for a fourth wave is way down near 2300.

I've added a few more numbers to the long-term chart, just on the most recent subdivision of the current rally, mainly for perspective.  Lately, waves have been acting a bit funny, so I'm not saying this is "fer sure THE count, man!" -- it's merely the most obvious way to count the waves currently, so it's more a "working" count for perspective purposes.

In conclusion, we don't have any glaring wave patterns indicating a reversal yet, and the longer-term trend remains up.  We could certainly see a more complex fourth wave unfold, however -- but that's not predictable at present, so we'll simply have to react in real-time if it occurs.  Trade safe.

SPX and RUT and Some Random Thoughts for Bears

It goes without saying that markets are out of our direct personal control.  Our only way to profit from them is thus to determine which direction they're going (or about to go, if nearing a reversal) and align ourselves with that.  In a way, our trading success can be a direct reflection of our ability to "go with the flow."

This may be one reason that bears have such a hard time accepting bull markets.  I believe that bears, by nature, are rebels.  After all, they've rejected the "everything is awesome" paradigm and the basic Keynesian ideal that consumption is the American Way, so they're already further out to the fringes than the average American (many of whom don't even know what short-selling is, much less attempt it).

Bears realize they're not part of the majority, and I think they like it that way -- but the emotional attachment to being, as Yogi Bear would say, "smarter than the average bull" can cause them to instinctively want to buck any popular trend that isn't "down."  The problem is that emotional attachments, especially to things like our fundamental belief systems, get taken up and carried by the ego.  And that can lead to a sort of dogmatic approach to things.  Basically, once the ego gets involved in anything, there's going to be trouble.  At least, that's my belief.  The ego is unavoidably responsible for mediating certain things in this life, but it's often a horrible manager and, if unchecked, it quickly turns into a brutal and tyrannical dictator.

So, if you're of the bearish persuasion and have struggled with this rally, then it might be worth examining whether you've been taking action based on the market's prevailing trend, or on some need to be smarter than the market and, in a way, attempting to beat the odds.  If it is the latter, then that will not be readily apparent to you.  That's how the ego gets away with stuff -- since it manages our perceptions, it is fully capable of hiding whatever it wants, including our true motivations, for long periods of time. 

And of course even CONSIDERING such a thought as the one posted above will be heartily distasteful to the ego, so the knee-jerk reaction will be, "No way!  Not me.  Not at all!  Definitely not."  And then, even if it ultimately convicts itself, the ego will immediately begin searching for someone or something else to blame.  If the ego is allowed to get away with such tactics, we'll learn absolutely nothing from our mistakes and will keep repeating them, literally for the rest of our lives -- until such a time as we do finally learn.  Nobody said life was easy.

Don't know if that's of any value to anyone -- just a few random thoughts I had today.

So, on the bright side for bears, the Dow's recent streak of 9 record closes can be viewed as training in "going with the flow," since we've known (or believed we knew, anyway) for some time that the larger trend would remain up for the foreseeable future.  That certainly hasn't stopped people from bucking the trend and attempting to short against it, myself included (though mercifully only once in the past couple weeks, and with a very tight stop of about 2 ES points).

Near-term, we appear to have at least one more leg up to unwind (possibly more, if this wave subdivides):

RUT is also closing in on its upside target from mid-November:

In conclusion, SPX and RUT are both within spitting distance of their November targets, at which point things may actually get a bit more difficult for a while.  Trade safe.

SPX Update

I started writing a somewhat detailed economic article this weekend, which I believe makes an important point -- and I had hoped to have it ready for today, but it's going to take more than a few sittings to finish it...  but keep an eye out for it over the upcoming days.

Accordingly, much like a wooden pencil that's been sharpened too often, today's article will be short and to the point.  (Or: "much like an overly-blunt Hobbit..." -- ?)

The big picture is still unchanged, of course:

Regarding the near-term, last update's chart showed that a retest of 2338 was expected to be bought, and then followed by a rally to at least 2449-51, which could represent a b-wave or, alternately, part of wave 5.  There were some questions from readers as to how to play that, and from my perspective, the opening low on Friday was a clear buy.  Here's why:  If the b-wave rally was correct, then buying near 2339 represented a trade with roughly 1:10 risk/reward ratio (approximately 1 point of risk vs. an expectation of 10 points of profit), which is a no-brainer in my book.  If the alternate count was correct, then buying 2339 was essentially buying only a point off the bottom of wave 4.  Either play is a winner, and I would have had to have both the preferred AND the alternate counts wrong for the trade to be a loser -- and, at that, it would have only lost about a point. 

As I said, that type of trade is basically "automatic" to my way of thinking.  But of course, that's NOT trading advice, and before even looking at the market, you should consult your broker, your Magic 8 Ball, and your Uncle Stan.  If you do not have an Uncle Stan, then you should rent or borrow one or more.

In conclusion, the intermediate and long-term trends both remain up for the time being.  Near-term, the market has left its options open, as discussed above.  Trade safe.
   

SPX Update -- and Another Chart Worth Watching

SPX is getting closer to the 2400 target, but may take a breather here.  On the intermediate-term chart, we can see SPX just broke above its trend channel, so this may lead to a rubber-band snap-back to at least test the channel from above.  If it falls back in and fails to reclaim it, then bears may get a larger reprieve, but right now, this is looking like a fourth wave correction (see 1-minute chart).

Below is the 2-hour SPX chart:

On the 1-minute chart, we can see the potential for some fourth wave shenanigans:

I also found the following chart interesting.  This is the NFIB small business optimism index, and it spiked enormously on Trump's election.  If this breakout sticks, it could translate into a positive impact on the real economy (remember the real economy?  I think it's still out there somewhere, buried underneath a printing press and a bunch of Bernanke's beard clippings.)

Below is a breakdown with more detailed numbers:

So small businesses are more optimistic than they've been at any point over the past 12 years, and the 38% jump in businesses who "expect the economy to improve" under Trump (vs. how they felt in August under Obama/Clinton) is quite significant.  Just as for individuals, positive expectations among businesses can become a self-fulfilling prophecy.

In conclusion, SPX may be due for a breather, but thus far the bigger picture still remains bullish for now.   Traders who are wondering where fuel and sentiment for a continued intermediate rally could come from might take note of the NFIB survey.  Trade safe.

SPX, RUT, BKX: And the Band Played On

Janet Yellen recently gave testimony to Congress in her annual semi-annual biannual perennial softball session, during which she attempted to teach remedial math to Congress.  At least, that's what she appeared to be doing when she stated, and I quote: "2%, which is a very low number."  I didn't pay much attention to the rest, because all I was thinking at that point was: "Take THAT, stupid Congresspeople!  The only positive integer lower than 2 is 1!"

Then I thought that the next time we hear some politician yammering on about winning by 2% (or less) of the popular vote, and/or acting like a 2% victory constitutes a huge "mandate" -- well, we'll just have to remind them that "2% is a very low number according to Janet Yellen."  And also that the term "mandate" is sexist.  (Can't we just call them "dates" without needing to qualify the date's gender?)

Beyond that, I haven't bothered to do any actual research about whether or not Yellen's numbers are correct, because Dodd-Frankly, I don't really care.  I'm just glad we cleared up the confusion surrounding positive integers and dating. 

What?

Anyway, SPX has been rallying pretty relentlessly for the past few sessions, probably because investors now realize that even if it rallies 2% a week forever, that would still constitute "a very low number."  (Hmm... the Fed's obliviousness to financial bubbles is starting to make more sense now!)

On a more serious note, I do hope that for the past few months, bears have been heeding the warnings to stand aside on breakouts. 

BKX has now captured its first blue V target:

Meanwhile, RUT is in the early stages of its attempted breakout.  I mean, sure, technically bears could turn this into an expanded flat, for a decent near-term correction (which would then remain intermediate bullish), but I still have no interest in fighting this market after consolidation breakouts.  The last few patterns have all suggested bears needed to stand aside if the market broke-out, and that continues to hold true here.  There are times you get good signals for a countertrend play (and even THOSE can be blown up during a strong trend) and if you take a shot and miss, well hey, that's just how the cookie crumbles, and you fought the good fight.  But then there are times you're only throwing your money away even attempting countertrend plays (presumably on the reasoning that "hey, technically, a countertrend move could theoretically happen!").  This would qualify as the latter.

If there's going to be a reversal, there will likely at least be a leading pattern to short against (which will then blow up anyway, if recent history is our guide!).  But the point is:  There's just no reason to front-run these types of breakouts blind.

In conclusion, SPX is testing channel resistance, RUT is about to, and BKX is testing a very old resistance level, so we could very well see some sort of reaction in the form of a correction or sideways grind -- but right now, there's nothing in the charts that says such a correction has actually begun.  To the contrary, the "standard" pattern here would continue to run for a while with only small corrections, despite resistance. 

So again, the point is: with the strength this rally has shown to date and the patterns that it's breaking out of, front-running in the "hopes" of a countertrend move could be dangerous.  That could all change tomorrow, of course, depending on what the market does next -- but even if we see a small impulsive decline, at best, bears' hopes would only be for a short-term reprieve, as the bigger picture remains bullish.  Trade safe.