SPX and INDU Updates

Last update, we discussed the recent expanded flat and noted that the market could make it more complex if it wants, but it became apparent shortly after the open that the more complex flat was less likely, and I mentioned that on the forum.

On October 28, I wrote:

Let's see how the market reacts over the coming sessions -- but again, do keep in mind that if this pattern is simple and straightforward (the pattern shown in the first chart), then it is very bullish over the intermediate term. It will take a curveball from the market to get bears back in the game (for example: a b-wave high, which would be temporary, or an ending diagonal). Right now, it looks like it might be the straightforward bull option, but we'll track it as it unfolds.

And in the prior update, I reiterated:

But my instinct remains that the market has done enough goofing around over the past two years, so I suspect that once it clears this whipsaw zone, we'll see a solid trending rally. I'm not married to that, so will watch for other signals, but that's still my lean at the moment.

So far, there's been nothing from the market to call that instinct into question, so until we see an impulsive decline, I think bears should remain guarded.  Now, it wouldn't be unusual to see a sideways/down move at some point to test the breakout, but long-term, bears really have only one option, which is for an ending diagonal... and at the moment, that looks like an underdog, so we'll treat it that way unless/until the market gives us better reason not to.

Bigger picture, we're going to assume this count until proven otherwise -- though do keep in mind that bears CAN still get an intermediate b-wave high and c-wave decline, which would alter this somewhat; but, of course, if that happens, we should have plenty of warning.

Near-term, SPX encountered some resistance at the thin black channel line, but looks poised to leapfrog over it this morning.  The next meaningful resistance zone is around the thick black line, currently crossing near the 3100ish zone.  That's where we'll be watching for signals of either a b-wave high, or an ending diagonal.  If the market sustains a breakout there, then bear chances will continue diminishing.

In conclusion, the market still hasn't cleared the recent breakout zone, particularly in INDU, so all hope is not yet lost for bears -- but given SPX's behavior, they have to be viewed as the underdogs at the moment.  If things change, we should have early warning in the form of an impulsive decline, so there's no need to front-run and bears should probably maintain a guarded stance unless/until that occurs.  Trade safe.

SPX Update: A Good Opportunity for a Quick Pattern Lesson

Last update, we discussed the remaining temporary bear option, and since then, the market has shown no sign of being interested in that option -- yet, anyway.  Yesterday saw what appears to be a fairly obvious b-wave high, indicating that the trend remains up (at least for the near term).  I often discuss expanded flat patterns (since they're a favorite of the market itself!), so I charted this one for educational purposes.

The telltale sign of a b-wave high (or low) is its three-wave structure.  A completed impulse wave, which is needed for a clean top or bottom, will always be five waves instead of three.  When you see three waves into a new high (or low), then expect that the ensuing reversal is only temporary, and the market will retest/exceed the b-wave high (or low).

(In the forum, my short-hand for everything I just explained is "Last high [or low] looks like a b-wave.")

While that b-wave tells us what to likely expect over the near-term, it doesn't answer any questions about the bigger picture yet... so no change here.  But my instinct remains that the market has done enough goofing around over the past two years, so I suspect that once it clears this whipsaw zone, we'll see a solid trending rally.  I'm not married to that, so will watch for other signals, but that's still my lean at the moment.

In conclusion, beyond the b-wave, no material change to the past few updates.  Trade safe.

SPX and INDU: Fed Up? Or Fed Down?

In the last update, we expected SPX was headed to a new all-time high, the question remains whether it can hold that breakout.  Since then, the market has consolidated sideways and appears to be in a holding pattern, waiting for the Fed announcement today.

Since the market's gone nowhere, there's not much to add, though it's worth noting that INDU is still below its all-time high:

With SPX above its all-time high, it appears the most bears could hope for at this stage would be a b-wave high that returns to the 2790+/- zone in wave c of an expanded flat (before heading higher again).  Given the deep retrace in September, I wouldn't rule that option out yet.

This is either a very bullish nest that's not even halfway through the rally off the August lows, or it's the b-wave option mentioned above, and we get a sharp, swift, scary decline toward 2790 before the next rally leg begins in earnest.

The next few sessions could tell us which of those options is unfolding.

In conclusion, bears do still have one (temporary) option for a b-wave high (as discussed above), and we can't rule that out yet.  The market is expecting another rate cut, and how the market reacts to the Fed announcement will likely set the tone for the next few weeks, and (in the case of the most bullish option) possibly the next few months or longer.  Trade safe.

SPX and INDU: Two Years in the Making?

Last update we identified a wedge-like pattern near the recent SPX highs.  People who spend a lot of time on the forums with me know that a wedge pattern typically means "diagonal or nest" -- meaning that it's a bi-modal pattern; either it reverses fairly directly or it leads to a strong continuation move.  This morning, SPX futures look primed to launch the market over the all-time high, which has been stiff resistance for (incredibly) almost two years now.

Keep in mind that there is a test period on any breakout (or breakdown) during which the market can decide it's not ready and reverse.  This can take anywhere from a session or two, to several weeks.  What bulls would like to see is either a breakout with increasing momentum, or a pause that consolidates ABOVE prior resistance.  Either of those events would likely signal that we're in the bullish long-term count discussed back in July, and reprinted below.

Below is INDU's chart for reference -- SPX would track fairly closely.  We'll see how things go in these initial stages before getting too attached to this, but IF THE BREAKOUT STICKS, we're probably looking at something along these lines:

Next level down, INDU has the consolidation pattern of the more recent past:

And one level down from there, it broke out of the blue channel last session:

SPX below:

I've focused on INDU in this update, but again, SPX would be expected to track closely.  For quick approximations, you can typically approximate INDU and SPX at roughly a 10:1 ratio to each other (100 INDU points typically equals in the general ballpark of 10 SPX points, give or take a little, etc.).  I'll update SPX long-term charts after we see how the market reacts to the breakout.

In conclusion, SPX at least looks primed to break out over its all-time high, and this means bears will have a short-window in which they could turn things and create a whipsaw... but if they can't, as I mentioned in prior updates, it might be time for bears to go into hibernation again.  Let's see how the market reacts over the coming sessions -- but again, do keep in mind that if this pattern is simple and straightforward (the pattern shown in the first chart), then it is very bullish over the intermediate term.  It will take a curveball from the market to get bears back in the game (for example: a b-wave high, which would be temporary, or an ending diagonal).  Right now, it looks like it might be the straightforward bull option, but we'll track it as it unfolds.  Trade safe.

SPX and INDU Updates

Most anything worth adding has been noted on the charts, so let's get right to them.  We'll start with INDU, which has stalled and declined while SPX has moved sideways-up:

In the wider view, INDU is in a large compression pattern stretching back to July:

And still below its key level (the all time high) on the big picture:

SPX has formed a wedge-like pattern recently:

In conclusion, we're still stalled in no-man's land, but bulls do need to get INDU back on track so it doesn't keep threatening to drag SPX down over the near-term.  Trade safe.

SPX and BKX: BKX Captures Target

The broad market is still stuck in the no-man's land noise zone, so there's not much to add until something happens.

BKX did finally capture its long-standing target, so there's that:

In conclusion, until the market moves past this noise zone, there's very little to add.  Trade safe.

SPX Update

Last update predicted:

Wednesday appears to have been a triangle, which makes Thursday a fifth wave, at least at one degree (if not more), which means we should at least see one more wave down today and/or Monday... From there, the question is whether the decline will turn into an impulse, but bears at least have a chance to turn things now, so we'll see how it goes.

The Wednesday triangle/Thursday fifth wave was confirmed by Friday's price action, and we got one more wave down.  The decline from Thursday high has not yet turned into an impulse, though, so bears still have work to do to get beyond that "one more wave down."

In conclusion, last update's read of the short-term pattern was correct, and that pattern is now resolved.  Bulls can move on to break 3008 now if they want, but the all-time high is still the meaningful level.  Bears, of course, need to break Friday's low to get anything going.  Beyond that, no change and we still remain stuck in the no-man's land I warned about a week ago.  Trade safe.