SPX and RUT: Oh, the Joy

On May 1, I projected a rally to 2394 to be followed by a reversal lower to break 2382, which could then mark a complete micro 4th wave.  The projection played out well enough (stopped a bit shy of my downside label), but the structure of the entire waveform leaves much to be desired from an analytical standpoint, as it has turned into a very ugly chop zone.  There are essentially two leading potentials right now:

1.  Red wave iv completed at 2379 and it's on to new all time highs in red v (black path on the chart below).
2.  The decline to 2379 was the b-wave of an expanded flat -- which would then see the market reverse (ideally) shy of the all-time high, then decline back to test 2379, then rally back up to test the highs again, then decline AGAIN south of 2379 (blue path below).

While the all-time high can be treated as a stop, the challenge with b-wave rallies is that they can exceed the third wave peak (in this case, red iii) without invalidating the b-wave.  But playing for b-waves in a market like this can be hazardous to one's account -- so, due to the fact that the bull option for this structure is reasonably near-term bullish, though, it would be tempting fate to be short if SPX sustains a breakout over the all-time high.

RUT is interesting, inasmuch as it has now overlapped a previous high, which does hint at the potential for the previous rally to be wave B of 4.  The other option that could fit this pattern, given the position of the current wave within the overall structure, is for the peak at 1425 to mark wave i of an ending diagonal.  So, if RUT breaks over 1425, the diagonal would have to be given the benefit of the doubt (with the possibility for an even more bullish pattern).  Until then, the expanded flat (blue B and C) should be eyed with respect.

In conclusion, the market is still giving mixed signals.  It' possible that SPX red iv (first chart) completed at 2379 and we'll head straight on to new highs, but the wave structure hasn't made that clear.  Now more than ever, it's advisable to play only the edges of the current wave, until it resolves one way or the other.  Trade safe.

SPX and RUT: Bears Gaining Traction?

Last update showed the projected short-term path for SPX, which was expected to rally to 2394, then reverse and head back south of 2382.  While we haven't broken 2382 yet, the market reversed from 2394 perfectly, and has followed the projection well so far.

I'm becoming increasingly concerned that this rally is indeed a larger B-wave (for a more complex larger fourth) and thus that SPX could head toward the 2300 zone.  Bulls need to sustain a breakout over the all-time-high to put themselves in better shape.

 
The bigger picture is thus still up for grabs at the moment.  Note that longer-term, this would still be a fourth wave correction, and thus ultimately bullish.  But near-term, the correction could get a bit scary for bulls, and personally that's not the type of drawdown I'd be willing to take.

I've illustrated the near-term bearish count in more detail on RUT:

In conclusion, I've grown more inclined to think that we'll see a near-term bearish move here, to create a more complex fourth wave.  If bulls can sustain a breakout over the all-time-high in SPX, that would give them more breathing room.  Trade safe.

SPX and INDU: Caution Time for Bulls

I mentioned last week that the closer we got to the all-time-high, the more cautious I would get.  I'm officially shifting to near-term neutral for the moment, because I'm getting mixed signals from the market right now.  While a long term top doesn't look probable yet, I think there's at least a reasonable chance that the larger wave 4 may become more complex, which would take us back below the March lows.

Very near-term, it also appears that Friday's low will fail, so if we rally at the open, it might present an opportunity for bears.

Let's also take another look at the INDU "bear count":

In conclusion, I am very cautious regarding the bull case right now.  I suspect we're going to have at least a further near-term correction, and that could well turn into a larger c-wave (3/c on the INDU chart).  Trade safe.

SPX, RUT, and INDU: Caution Levels to Watch

Last update discussed the potential for a fourth wave correction and fifth wave unwind, and yesterday's decline does fit the bill for a potential fourth wave.  As long as that low holds, the picture remains bullish.  If that low fails prior to SPX breaking over 2399, then there is arguable good reason for bulls to be cautious.  In other words, if you're ridden the rally this far, then that might be a good stop zone for at least partial profits.  Toward the end of the update, we'll take a closer look at the bear option if yesterday's low fails directly.

On the bigger picture chart, we've reached the inflection zone where the market will sort the bulls from the bears, at least for the near-term:

RUT has finally captured its 1420 target from November.  I never really doubted that it would, the question was always one of "now or later?"  That question still has some relevance, in the sense that if RUT were to reverse strongly immediately, then we'd have to consider the potential of an increasingly complex flat.  The upshot for bulls would be that it's pretty hard to view the rally from 1335 to 1425 as anything other than a three-wave form right now, so we could be pretty confident of a solid buy op at lower prices (again, IF we formed the expanded flat).

If this current wave is simply blue 5, then it probably still needs a micro 4th and 5th unwind:

Now for a closer look at the bear option, for perspective on why an immediate breakdown at yesterday's low would at least call for a degree of caution.  INDU and SPX are in basically the same count at intermediate degree, so they would be expected to track closely in a relative sense.

In conclusion, if yesterday's low fails directly, then some degree of caution would be called for.  The harder pattern would be a rally up to retest the 2398 high, and THEN a break of yesterday's low, as that would have potential to be a flat -- so, as always, the idea of "sustained trade" below a key level becomes meaningful.  ("Sustained trade" is not a short-lived break that fails to run anywhere and whipsaws, it is more when a key level is broken and then the zone around the key level begins to function as resistance or support.)  If yesterday's low holds, then the near-term will remain bullish.  Trade safe.

RUT and SPX: First Upside Targets Captured

SPX captured its first upside targets yesterday, and the rally looks like it probably has farther to run, although a fourth wave pause might be appropriate here:

No change to the big picture since 2016:

RUT's break of the prior high is significant from a technical perspective, and adds confirmation to the bigger picture bull case:

In conclusion, everything looks on track, although bear 2 isn't entirely dead yet, it does look increasingly less likely.  Trade safe.

SPX Update: Finally

Sometimes you just feel like breathing a huge sigh of relief after a choppy market like we've had recently.  Since March 29, I have leaned bullish against 2322 SPX -- and, particularly over the past couple weeks, the market has done its best to try to trick me out of that stance.  I certainly was not "pounding the desk" bullish, but I have beat the drum repeatedly that 2322 was the key level that would turn things.  So, while I was tempted at several points to shift to a neutral stance, or even to lean bearish, I've continued to repeat that as long as 2322 held, I would maintain my bullish lean (the number of "no change" blog posts over the past few weeks has been mind-numbing).   

Today, all that is finally going to pay off.

Now, what I want readers to understand is that the more we rally, the more cautious I will become.  Human nature tends to work the opposite of the market, which is why so many participants lose money:  People tend to be bearish near lows, and bullish near highs.  As I mentioned on April 19:

Now, I'm absolutely not trying to scare bulls off from playing here, because the best profits are usually made when things look scary.

Most people were bearish near the low, but will now grow bullish as we rally.  While I'm not going to grow bearish as we rally (until the market gives me a good sign to do so), I am going to grow increasingly cautious about longs.  There's an inflection point in the 2380-2400 zone that may or may not present a challenge to the rally.  We'll take that as it comes, but the good risk/reward for bulls was near the 2322 pivot.

Near-term it appears the market has likely formed a bull nest of first and second waves:

   
No change to the intermediate picture, but keep in mind that the black "or c?" represents an inflection zone, where things could shift from bullish to bearish, or -- as I mentioned last update -- could shift into the sideways chop that I'd noted would become a possibility as we rallied toward the black c label.

In conclusion, it appears the near-term bull count will be vindicated, and I hope that readers are/were able to profit from it -- or at the very least, that it gave bears pause and protected them from big losses.  In any case, the intermediate picture does call for good use of stops to lock-in profits as we rally into the inflection zone.  From there, we'll examine the picture in real-time as it unfolds.  Trade safe.

SPX and RUT Updates

In the prior update, I said that I felt SPX needed at least one more near-term leg up, and published some short-term upside targets for SPX.  Target 1 was captured yesterday, and SPX came within two-thirds of a point of target 2.  The pattern suggests that at least a bit more upside is probably called for, but the way this market has behaved lately (or misbehaved, as the case may be), I'm not holding my breath on anything right now.

RUT held its key support zone after the last RUT update, and has rallied admirably since:

SPX seems to be forming a classic technical triangle.  I do not believe this counts well as a true Elliott Wave triangle, but that's not required for it to behave according to classic TA rules, so it's worth paying attention to see how the market responds to the triangle boundaries.  In the event SPX rallies thought the upper dashed red line, then keep an eye on the blue line as a potential "stealth" resistance zone.  This would roughly correspond to the red line on the RUT chart above.

Finally, the bigger picture chart is still unchanged, though I have added the possibility for the current rally to be a larger c wave, as opposed to part of wave 3, which would forestall an immediate bullish resolution, and mean lots more grinding, range-bound movement over the foreseeable future.

In conclusion, there's still no real change, but I should mention that INDU broke its prior low recently.  I looked back through the chart, and INDU did a similar thing in October/November, which ended up not meaning much, so I'm still holding SPX as the more important market for the time being, and still viewing 2322 as the key level -- although, as noted, I have given more consideration to the potential for continued extended sideways chop.  Trade safe.