Update update

Recently the update schedule has been difficult to maintain, but I will post a detailed update at the end of this weekend.  Also, if you've recently completed the new member requirements, I will likewise attempt to activate your membership this weekend.

Trade safe.

SPX Update -- and the Quantum Market

Science has discovered via quantum physics that, at its most basic known level, the Universe is not deterministic; it is probabilistic.  Particles appear to exist not so much as individual forms, but as a wave function.  This wave function represents the mathematical probability of where a particle could be, given its multiple possible states.  This wave function collapses upon the introduction of an outside observer.

Unlike objects in the macro world, which can be observed and tracked with precision, particles instead behave as a wave of potentialities.  I mention this because the stock market is often better-likened to the quantum world than to the macro world -- and it also appears to be probabilistic.  While a given pattern may work 8 or 9 times out of 10, there will always be a handful of times that it fails to perform as expected. 

Not that this has been a problem for us lately -- in fact, last update stated that "My first instinct is that yesterday's low [2612] will likely be broken to the downside in the coming sessions," which came to pass --  but it is nevertheless always important to remember that the market must be approached as a probabilistic equation.

On Thursday, when SPX was trading near 2598, I posted an alert in the forum that the market could potentially turn higher directly, and run all the way to 2683 -- which it has since done.  The second part of that equation now suggests that the low at 2594 is likely to be broken in the coming sessions.  (But again, these are only probabilities.)

In conclusion, SPX has completed the minimum requirements for the current (presumed) pattern, and thus the probabilities favor that it will reverse lower, to the tune of 114+ points, in the next few sessions.  If it instead sustains a breakout over 2718, we will give more consideration to the bull alternate.  Trade safe.

SPX and Oil Updates

Last update noted:

If the rally since 2612 is corrective, then it may be very near completion, as there are roughly enough waves in place (would look better with a new high above 2676). 

The market indeed made a new high above 2676, then reversed fairly strongly, indicating that there were indeed enough waves in place.  The decline from 2682 is clearly impulsive, however, there is some question in my mind as to whether that's wave c of an expanded flat off the high, which would actually be a near-term bullish pattern (if that's the case). The difficult thing with this pattern is that the market could run beyond 2682 and -- as long as it stalled below 2718 -- it could remain bearish at the larger time frames. 

Thus 2718 is the first truly informational price level -- and some questions in regards to the near-term seems fitting for a Fed day.

I'd also like to update the long-standing Crude Oil chart, which I haven't needed to update since November 2017.  At that time we discussed that if oil could sustain a breakout over 58, it would likely head to 70-72 -- and that target has finally been effectively captured:

In conclusion, the levels bulls need to claim in SPX appear reasonably clear, and I'm inclined to maintain my slight bearish lean unless and until they claim those levels.  In fact, my first instinct is that yesterday's low will likely be broken to the downside in the coming sessions. Keep in mind that the most bearish count at this juncture is a nest of first and second waves lower, and that the third wave is typically the longest and strongest wave. In other words, bulls should be very cautious if there are any sustained breakdowns at the recent swing lows, as that could be the precursor to a strong sell-off. Trade safe.

SPX Update: A Gray Market

Last update was still expecting the wave pointed lower, and while we made a minor new low, we fell 12 points shy of the "ideal" target in the 2590's.  One look at the big picture chart revealed why:

That long-term trend line is likely a key level bulls need to hold going forward.  My first inclination is still that the most recent rally to "4" was corrective, but it remains a bit unclear, so I'm borderline neutral at this moment, with a very slight bearish lean.  I haven't updated the chart below because Stockcharts deletes all my annotations every time I attempt to:

If the rally since 2612 is corrective, then it may be very near completion, as there are roughly enough waves in place (would look better with a new high above 2676).  If it's not, of course, then it's not (profound, I know).

In conclusion, this is a challenging spot and one where understanding one's risk/reward is the critical factor in determining one's trades.  This simply isn't a clear-cut chart at the moment, so please take my "slight bearish lean" with a grain of salt.  Trade safe.

SPX Update: Last Update's Warning Proved Timely

Last update noted:

While this isn't a clear-cut pattern, we probably have to assume "bearish until proven otherwise," because the bull potentials of this type of pattern are somewhat limited. 

There's no material change since the prior update, except to note that the near-term pattern suggests a possible inflection point in the 2590's:

In conclusion, no material change.  Trade safe!

SPX Update: Bull Options Appear Limited

The market continued lower from Wednesday's noted inflection point, and while this isn't a clear-cut pattern, we probably have to assume "bearish until proven otherwise," because the bull potentials of this type of pattern are somewhat limited.  "Proven otherwise" would consist of a sustained breakout over 2718.

Do note that the most bearish long-term potential possible has us heading substantially below the black "or 5" on the chart above.  The most bearish potential would have the first leg of the decline as wave 1 of red C/3, and the bounce as 2 -- which would put 3 of C/3 on deck, which could even take us back into the 19XX price range.  That's merely a potential at this stage, but something bulls need to be aware of in the even there's a sustained breakdown at the A/1 low.

In conclusion, the only pattern that seems to fit all the pieces of the recent rally reasonably well is the aforementioned ending diagonal, which continues to suggest a rather direct trip below 2585.  We'll continue to assume as much unless/until we see some reason to doubt that -- the main signal being sustained trade north of 2718.  Trade safe.

SPX Update: Market Reacts to Inflection Point

Last update noted that the market had reached an inflection point (a zone where a reversal has a higher probability of occurring), and the market reacted to it.

The decline from the most recent swing high is three waves so far, but a sustained breakdown at yesterday's low would at least begin to suggest an impulsive decline from 2717.  An impulsive decline would suggest that the near-term trend had shifted to down, as one impulse typically begets at least one more of equal or greater length.  It would also keep the ending diagonal very much alive.  And keep in mind that diagonals typically retrace themselves in their entirety in 1/3 to 1/2 the amount of time they took to form:

Please note the wave degrees by color and that blue "or C" could still mark the bottom of red (B).  (We'll worry about that if/when we get there, though.)

In conclusion, we correctly identified the most recent inflection point, and the market has reacted to it, which leaves both options on the table.  Since wave 5 didn't quite break 2585 on its last attempt, which it should have, I continue to think the diagonal is a reasonable possibility.  The first step for bears would be a sustained breakdown at yesterday's low.  Trade safe.