SPX Update: Bears on the Cusp of Control

Last week's rally was, so far, strongly rejected at the test of the zone near the all-time high.  The decline since then is only three waves at this point, so it's not yet impulsive (required to confirm a turn), but my instinct is that it will become impulsive in fairly short order.  Friday's low appears to be the dividing line between a corrective decline that would probably need to have ended already and at least a near-term turn that would require another wave lower. 

Again, my gut puts me in favor of the latter, but the charts haven't declared that from a technical perspective yet.

In conclusion, if bulls can hold Friday's low, then they could rally up to new highs from here.  I'm inclined to think that they won't, and that we'll probably at least test the zone near black "Bull: c" before it's all said and done.  A rally to fill the gap (near 2850) today wouldn't surprise me, but I'd be inclined to bet against that rally (with a fairly tight stop, of course) if it occurs.  Bears need another small wave down to turn the decline from 2863 into an impulse, and there are, of course, no guarantees that they'll get it.  Trade safe.

SPX Update

Last update warned that it was a good idea not to put the cart before the horse, and that we shouldn't get too bullish yet, because the zone near the all-time high could act as resistance.  That zone has indeed acted as resistance so far -- after stalling there and making a couple failed runs higher, it appears SPX will open today with a gap down.

One would think that SPX will probably want to at least test the mid-2820's from here.  Interestingly, because of the potential expanded flat I spoke about on Monday, in the event that SPX heads all the way south of 2800, bears are going to need to be near-term cautious at that time, as shown on the chart below:

In conclusion, the all-time high is acting as resistance so far, which is what bears needed to see at this stage in the game.  We'll track this in real time and see how it develops.  Trade safe.

SPX Update: Carts and Horses

Last update, we looked at the potential expanded flat pattern in SPX, and despite being roughly a 75% favorite, that pattern has thus far failed to materialize.  It's not entirely off the table yet, but if it materializes now, there's some danger for bears that the top might be a b-wave.  We'll burn that bridge if we come to it.

SPX is now retesting the zone near the all-time-high, and this is a possibility we've talked about previously, even for the bear case.  On July 25, I wrote:

The market can certainly run a bit higher if it wants, and I've seen many extended fifth retraces nearly-perfectly tag the prior high before reversing.  In this case, that would be the all-time high, if the market chooses to go that route.

Of course, whether the ATH will act as resistance or not is yet unknown.

In conclusion, we're getting into "do or die" territory for bears, but we're not going to put the cart before the horse yet... we'll just have to see how the market reacts here.  Trade safe.

SPX Update: Understanding Expanded Flats

One of the most common Elliott Wave patterns since about 2009 or so has been the "expanded flat."  I'm not sure if this is the result of the rise in popularity of algorithmic trading or what, but since roughly 2009, this pattern has become incredibly frequent at both short and longer time frames  Below is an illustration of the expectations of this pattern:

When we look at the current 5-minute chart of SPX, we can see that it certainly appears to be a textbook expanded flat:

Accordingly, I have no choice but to "trade what I see" and continue to favor the result that the current bounce that began at 2796 will reverse fairly directly:

In conclusion, due to the fact that the pattern appears to be a classic expanded flat, I have to give the odds to the result that SPX is still due for a trip south of 2796.  Of course, in the market, just as in life, nothing is 100% guaranteed.  In my experience, this pattern is reliable at least 75% of the time, but that likewise means that it's guaranteed to fail roughly 1 in 4 times, so it's always possible that "this is that time."  But the bottom line is, playing for the 25% is a long-term loser, so we simply have to favor the higher odds unless/until proven otherwise.  Trade safe.

SPX Update: Still "As Good as It Gets" for Bears

On July 30, I noted that things finally looked like they might start turning in bears' favor, and reiterated that on Wednesday, and we've since made new lows again.  We now appear to have a small impulsive decline from 2848 to 2798, so this suggests we'll see at least one more wave down of at least 50 points.

Adding to that, the most recent low at 2796 has the hallmarks of a b-wave low, which also suggests lower prices when the current c-wave rally completes (I mentioned in our forum yesterday morning that 2831 +/- looked like a good upside target, and we came within about a point of that).  This is thus "as good as it gets" for bears:

In conclusion, the current rally might stretch a little higher, but I would suspect it's close to complete, and that we'll then reverse back toward the 2780ish zone.  If we sustain a breakout over 2849, then all bets are off, of course.  Trade safe.

SPX Update

Last update I wrote that my first inclination was that lower prices were due and that the bottom was not yet in, and the market promptly made a new low.  The decline from 2848 appears reasonably impulsive, but it's not a sure lock.  Maybe 60-40 in favor of the decline being impulsive.  In that event, the recent high should hold, and we would expect another leg down of 50+ points against the prevailing reaction high.

Today's a Fed day, and that often means shenanigans, so stay nimble.

In conclusion, we did get a new low as suggested last update, and -- for the moment, anyway -- this still remains the most promising pattern bears have seen in quite a while.  Trade safe.

SPX and INDU: Hints, Allegations, and Things Left Unsaid

Last update I noted that "the good news is out now," due to the old expression "buy the rumor, sell the news."  Sell the news is exactly what the market did on Friday.  And while we do not yet have an impulsive decline, the shape of that wave does lend itself to being a bit more encouraging for bears than anything else we've seen yet in July.

On INDU's chart, you can clearly see that the decline so far is only three waves.  In fact, it looks like it may not even be three complete waves down yet, so my first inclination is that the bottom is not yet in, even if this is just to be a minor correction -- and of course, certainly not if it's the start of a larger turn.  Point being, either way, my first instinct is that there are still lower prices due:

In conclusion, we do not yet have an impulsive decline for confirmation, but things look more promising for bears than they have all month.  How long that lasts remains to be seen, of course.  Trade safe.