SPX Update: Green Line in the Sand

The last couple updates have been quite detailed, so there's no need to rehash all that, so we can instead get back to the near-term now.  First up, the short-term SPX chart shows that this week's low could be a complete WXY correction, and that's probably the last "not unusual" type of wave that could fit as a fourth wave (in other words, it's not impossible for an even more complex correction, but that would be an outlier type of wave).

Bigger picture, the green trend line highlighted below has been on a number of my charts through the years, so it's interesting that SPX has found at least some support there:

In conclusion, the fourth wave option for bulls isn't dead yet, but if SPX heads much lower, then there won't be many common waves that could still fit for a near-term bull count.  New lows would also break the green trend line, so that's probably the first line in the sand for bulls now... and the most bearish potential count out there is a nasty bear nest... so in the event of any sustained new lows, bulls should probably exercise extreme caution.  Trade safe.

SPX and NYA: Is It Time to Sell the Rallies?

Calling tops has always been a difficult endeavor in market analysis, and considering that for the past 12+ years we've been in a historic bull market driven by unprecedented Fed intervention, it's that much harder now.  While I may have jumped the gun just a little very recently, some people (or maybe it's just one person) seem to have forgotten that -- to cite only one example -- in 2020, I believed we would crash, but also believed that was "only" a large fourth wave, and thus destined to recover to new all-time highs.  I mention this mainly because a certain troll recently claimed "this analyst has been saying the same thing for a decade" (implying that I'd been bearish for a decade), which is so wrong that it drifts into the realm of outright stupidity.

(I won't even go into my call for a long-term and massive bull market back in January 2013 -- most veteran readers know that I've been on the right side of this market more often than not.) 

Anyway, in a moment, there's a market-relevant point that I'm going to make about the following charts -- but first, here's the INDU chart I published on February 26 of 2020.  Note the (4) label and the line headed back up to new all-time highs from there:

Here's the SPX chart I published in March of 2020; again, note 4 is followed by new highs in 5:

Now, here's the "market point":  The Covid crash was a pretty clear fourth wave.  That means we have almost-certainly been riding out the fifth wave ever since.  

And the fifth wave is the final wave of a move -- which, now that we're finally getting into a potentially-complete wave structure, means we're likely approaching the end of the 12+ year bull market.

What we're currently trying to nail down is whether the fifth wave of the fifth wave of that larger fifth wave has completed or not.

Read that again.

As I mentioned last update:

Even if SPX manages to make a new high, that will probably be the fifth wave, and (barring an extension) is thus reasonably likely to be followed by a correction (or worse) anyway.

In other words, even if SPX manages to make a new all-time high, we are probably into territory where we should be considering selling the bounces.

Let's look at the near-term chart first, with the emphasis that "bull 5," even if it shows up, could very well be the final high of this 12+ year bull market.

 

Of course, if that final fifth doesn't show up, then we might have already seen the all-time-historic-high.

Let's look at the old intermediate term chart of NYA next.  Worth noting that NYA recently captured its 17,000+ target (published 8 months ago):

So that's the bear case, but what are the remaining bull hopes here?

Well, their first hope would be for an "extension of the extension."  The rally since 2020 has been an extended fifth wave -- bulls would like to see the (presumed current) fifth wave of that fifth wave extend.  That's always possible, but given that inflationary pressures are finally forcing the Fed's hand (per Powell yesterday), it's hard to imagine there's going to be enough fuel for that extension if the Fed follows through and indeed pulls away the punch bowl.  If they don't, then that might be another matter.

But here's the nice thing:  On the next chart, we'll look at a signal to watch that could tell us if the fifth wave of this fifth wave is going to extend.  Thus, we can reasonably presume the fifth wave is ending here if that signal does NOT materialize.

So, on the chart above, in the event SPX sustains a breakout over the upper black line, then we might forget about selling the rallies for a while and watch to see if bulls can get an even-more-extended fifth wave.  We can't yet rule that out, given that the fifth wave is short relative to wave 1 on that chart -- but nevertheless, I'm taking the approach of "making the market prove itself here," so if it doesn't break out, then we'll stick with the idea that the top is now closer than the bottom

Referring back to the NYA chart for a moment:  The second option bulls have is for a more complex fourth wave (shown by black "or 4" and "or 5"), similar to what happened in 2020, but at a much smaller scale.  We'll simply have to track that possibility as it unfolds -- but again, unless there's an extended fifth here, that potential wouldn't change the longer-term outlook too much.

Now, all that said, I would again like to emphasize that calling a top to the most powerful bull market in history is no easy task, so if you think the market is going to keep going up, then hey, you could be right.  I could be wrong, or could be early, or whatever.  Or the market could choose to extend the fifth of the fifth here, which no one can really predict.  I can't promise anything, and nothing I publish here is trading advice; I can't manage your risk for you.  That's what brokers are for.

All I know is that we just about tagged the upper boundary of the very long-term channel, we reached the long-term NYA target, we came within 6 points of the long-term SPX target, and there are roughly enough waves (give or take a couple micro waves) to mark a complete five-wave rally from the 2020 crash low.

Near-term, if bulls are going to get their fourth and fifth wave to new highs, then now may be the time.  Longer-term, until the market dictates otherwise, I'm sticking with the idea that the top is closer than the bottom, and thus that it's probably not a bad time to take some risk off the table.

Trade safe.

SPX, INDU, VIX, NYUD: No Surprises So Far, But Caution Anyway

On Monday, we talked about the "market almanac" for Thanksgiving week traditionally being bullish (not this year!), but the market is dynamic, and by Wednesday, we had this warning:

Bigger picture, SPX came within spitting distance of the standing 4750 target: And that, likewise, contributes to the "easy money may be over" sentiment, as that's close enough to the target zone that an alternate count of ALL OF 5 as complete at least should be kept in mind.

Then on cue, Friday turned into a complete rout, with VIX spiking more than 50%, the 4th largest one-day gain since 1990:

This is obviously an extreme reading from VIX, and normally extreme readings lead to snap-backs, temporary or otherwise.

NYUD is also interesting here -- we can see that similar readings in the past tend to be followed by a bounce.  Now, the bounce that follows the extreme is not always the "final" low (see: Sept. 2020), but it has led directly to new highs several times:

Moving on to the price charts:  On Wednesday, we talked about how it's common (but not required) for Wave 4 to return to the price territory of Wave iv, and Friday put us directly into that price territory:

So, beyond the swiftness of Friday's drop, there wasn't anything particularly surprising about it, and I didn't even need to move the second "bull: 4?" label.  That said, again, as noted Wednesday, we are into trickier territory with this market now, and ALL OF 5 complete at the all-time-high still can't be ruled out.  

INDU (next chart) contributes its own warning to the mix: 

Finally, the long-term SPX chart:

In conclusion, the fourth wave for SPX is still on the table, but as I mentioned on Wednesday, things are a little trickier now, and we can't rule out ALL OF 5 having already completed.  Even if SPX manages to make a new high, that will probably be the fifth wave, and (barring an extension) is thus reasonably likely to be followed by a correction (or worse) anyway.  If INDU makes a new high too, then things might get more bullish again, and (were that to happen) then we could consider fifth wave extensions and ending diagonals -- but for now, we appear to be in territory where a healthy dose of bull caution remains in order.  Trade safe.

SPX (almost) Captures October Target

On Monday, SPX came within about 6 points of capturing the standing target from October 27, which also completed the fifth wave higher that was anticipated by the near-term preferred count.  For the past few weeks, I've continued reiterating "Bull: 3 is likely still unfolding," but now we finally have enough waves in place that Bull: 3 could at last be complete.

Unfortunately, that means the easy money may be over for the moment -- at least, if the fourth wave decides to become complex, anyway. 

Bigger picture, SPX came within spitting distance of the standing 4750 target:

And that, likewise, contributes to the "easy money may be over" sentiment, as that's close enough to the target zone that an alternate count of ALL OF 5 as complete at least should be kept in mind.

In conclusion, the preferred count has done its job and kept us looking higher for the past month, but the market reserves the right to get a little trickier now over the near-term.

Side-note:  Most years I don't do an update on the short trading session after Thanksgiving, as it's a holiday and I have a family -- so I wish all my readers a Happy Thanksgiving, and the updates will return on Monday.  Trade safe.

SPX Update: No Material Change

Still nothing to add from the past few updates, and no material change (other than to slide the less-relevant "alt:" label over slightly):

It's worth a mention that, traditionally, Thanksgiving week is one of the most bullish weeks of the year.  That sort of "market almanac" data never guarantees anything, but it's always worth knowing.  Trade safe.

SPX Update: No Change

Last update discussed two alternate options, but those continue to remain as alternate counts for now.  As I said on the forum on that same day (in response to a query):

...the 5th wave idea is back-burner unless/until we see a larger impulsive decline. When possibilities arise, I try to cover them in advance so there are fewer surprises down the road.

In conclusion, no change from last update.  Alternates remain alternates for now, meaning bull 3 is probably still unfolding.  Trade safe.

SPX Update: Louder, For the People in the Back

In the prior update, I wrote:

At this point, bears main hopes would probably be for a more complex iv that retests the ATH before returning to break the low.

And yesterday, SPX indeed retested the ATH.  It has since stalled, at least keeping open some near-term bear options.

Now, I have to discuss the fact that there is more than one possibility here, which is, of course, going to make people who don't understand how the market works and who don't know how to manage risk very angry, but not much can be done about that.

So here we go... chart first:

The essence of what we're up against here is that

1.  The rally to retest the ATH appears to have unfolded in 5 waves, which, by virtue of itself, leaves open the option of a failed fifth.  Ideally IF THIS EVEN IS A FAILED FIFTH, then it would be v of bull: 3.  However

2.  Because it isn't 100% clear that small iii and iv aren't large 3 and 4, there is at least the possibility that the failed fifth (IF THAT'S WHAT THIS WERE TO BE) marked ALL OF larger bull: 5 (at the degree shown on the chart above).

For now, we're going to presume that the market still needs bull 4 and bull 5... but if we see a larger impulsive decline develop, then IF THAT HAPPENS, we will consider more bearish options.

Trade safe.