SPX, COMPQ, Gold: Friday's Update was a Hit

Friday's update concluded with:

Incidentally, if today begins with a little bounce back up over 76, then there's a reasonable chance that the overnight low is a corrective b-wave -- meaning the overnight futures low would be revisited and broken soon after (the overnight low sits down near ~4253 cash equivalent, though this isn't an exact equivalent, so allow a little leeway).

Friday's market found support 3 minutes after the open and bounced up to 76.56, then reversed and dropped below 4253, fulfilling the prediction quoted above.  It eventually dropped all the way down to 4223 near the close, so hopefully that was helpful to readers.

Friday's close is into the zone that constitutes a retest of the prior swing low ("retests" are never to the penny and are plus/minus zones above and below prior lows (or highs)), so we'll see if bulls can muster any sort of bounce from this zone.  Keep in mind that the complex 4th wave discussed previously stays on the table plus and minus the current zone:

COMPQ is also testing its low:

I did want to mention that Gold did not sustain a breakdown at its key trend line, and as long as that continues, it will avoid the option of the blue path.  The next step for gold bulls would be to attempt to decisively clear the zone around the last three highs.

Finally, the very-long-term chart of SPX remains interesting:

In conclusion, the market traveled, without incident, from the blue 4 inflection all the way down to the zone where it will enter the upper portion of the inflection for a more complex blue 4.  I'm not crazy about the idea of a complex fourth, because I think it's too easy on bulls, who ideally should be trapped now -- but it's always possible.  How the market behaves over the next week or so may determine if November 2023 becomes known as "Black November" in the future; if it goes directly into a fifth wave, there is potential here for an extended fifth (extended fifths become waterfalls).  Trade safe.

SPX, NYA, COMPQ, TLT: On the Right Track

Yesterday no doubt came as a surprise to people who don't read these updates, as SPX continued lower from Blue 4, ultimately dropping through a level that many bulls thought was going to act as strong support. 

Let's look at the SPX chart first, which (spoiler alert) mentions the primary target for Wave 5 (if blue Wave 4 doesn't become more complex, and if blue 5 neither extends nor truncates), which, coincidentally enough, aligns right with the location where I previously placed the Wave 5 label, along with some other zones of interest:

Next up is NYA:

Next is INDU:

COMPQ (nothing new here):

And finally, TLT is reaching a zone that probably needs to act as support.  Funny thing is, this is a falling support zone, so it could always bounce along down this zone like a slinky (if slinkies bounced, that is.  You know what I mean!).  So even if it finds support at this zone, it doesn't necessarily mean a big rally.  Some part of me thinks 75 +/- looks like an aesthetically-pleasing next target, but don't hold me to that.

In conclusion, not much to add to the past few updates, which means the last few updates were on the right track and the market's done nothing but add confidence to my bearish lean.  Incidentally, if today begins with a little bounce back up over 76, then there's a reasonable chance that the overnight low is a corrective b-wave -- meaning the overnight futures low would be revisited and broken soon after (the overnight low sits down near ~4253 cash equivalent, though this isn't an exact equivalent, so allow a little leeway).  Trade safe.

SPX and INDU: Blue Velvet

I believe it was Jon Keynard Maynes (distant cousin of the more famous "John Maynard Keynes") who once said, after a few beers, "The market can remain insolvent longer than you can remain rational."  (Although some reports suggest he may have said, "I'm not gonna drink none of yer important... imported... GAH-rbage.  Pabst! Blue! Ribbon!")  

Whichever quote is accurate, he no doubt meant it.

And I bring this up today as a simple, yet poignant, reminder that drinking and speaking don't mix.  (Support MADS:  Mofos Against Drunk Speaking.)  

And also as a reminder that even if everything goes swimmingly for the bears from here forward in terms of them getting the exact wave count they want, the market can always still grind sideways before getting rolling.  Not that I'm predicting this, mind you, any more than Jon Keynard Maynes was predicting the rise and fall of Pabst Blue Ribbon -- it's just a word of caution that the market sometimes doesn't move in straight lines.

SPX made another slight high since last update, and while there are potentially enough waves for a complete 4, it's as yet unclear if it still wants one more minor high (as we'll see on the INDU chart after this one):

INDU:

In conclusion, the early stages after an ambiguous pattern are always touch and go, as the pattern leading in provides little confidence one way or the other, at least until we see a bit more of the decline.  I can say that the first wave down from yesterday's high appeared impulsive, suggesting at least one more wave down of similar or larger size -- but whether that will terminate the decline at "3 down" and make another high after, or whether we just saw the start of the turn down to new lows, I cannot yet say with high confidence.  Trade safe.

SPX, INDU, COMPQ: Legacy Charts and a Horn Toot

So I've been holding my tongue on this, but it's time to toot my own horn for a minute on a prediction I made almost exactly a year and a half ago, because it probably won't hold forever.  This prediction was based on my analysis of the real estate market back in April of 2022.  As far as I know, I was the first analyst to make this very specific prediction... key here is "as far as I know.  It's entirely possible someone else beat me to it, but if they did, I don't know about it -- what I recall at the time was that many people were predicting a precipitous drop (or an outright crash) in housing as interest rates rose.  Which obviously didn't happen, in large part for the exact reasons that I highlighted on April 18, 2022.  As I wrote then:

This means that as the music stops and mortgage rates rise, we have a much different dynamic in play this time. Rising rates do, of course, have an impact on future affordability -- but they have no impact on families already in a home (presuming these families have a fixed-rate mortgage, which, as we already covered, the vast majority do). If anything, rising rates might tend to inspire people to hang on to their homes longer instead of putting them up for sale, which would have a tightening effect on inventory. After all, if you're in a mortgage at ~3%, what possible incentive do you have to ever exit that loan with inflation running above or near 8%? 

As I mentioned earlier, inflation should provide a tailwind for housing -- in more ways than one. If my reasoning above is in the right ballpark, then rising rates may, perhaps counterintuitively, provide impetus for inventory to ultimately balance. Houses might spend more days on market due to fewer buyers, but if fewer homes are being brought to market in the first place because families are incentivized to stay put (or to turn their old 3% mortgage home into a long-term rental), those seemingly-opposed forces could tend to counteract each other.

And, of course, now that my initial prediction has become reality, everyone treats it like it was obvious all along.  Below are CNBC's bullet points from a couple months ago; basically exactly what I'd speculated would happen, back in April 2022:

• The recent spike in mortgage rates has created a so-called golden handcuff effect. 
• Nearly 82% of homeowners feel “locked-in” by their existing low-rate mortgage, according to data from Realtor.com. 
• In the meantime, the shortage of homes for sale is pushing up prices.

So, anyway, I just had to get that off my chest.  I see it everywhere now and I see this "Well of COURSE that's what happened!" attitude from pundits and analysts who didn't foresee this coming at all, so I'm publishing this in lieu of cussing at my screen.

Anyway, market-wise, we have some interesting things to look at today.  Let's start with an old legacy chart I first published years ago, whose trend lines seem to find their way back to relevance again and again:

Next, we have another old legacy chart with a long-term support line:

Next, COMPQ:

SPX and the old (not nearly as old as the first two charts, of course) green trend line:

SPX is still undefined regarding the potential 4th wave:

And finally, the two most obvious very-near-term options:

Worth noting that in the event of sustained trade below Friday's low, and 4270-90 SPX would be the next meaningful support zone.  Trade safe.

SPX Update: Not Much to Add

There's nothing to add to the past few updates, so just one chart today:

In conclusion, not much else to say yet that hasn't already been said.  Trade safe.

SPX, NYA, COMPQ: Obligatory Bull Count

The market continued rallying since last update, and while the strength of the rally took many bears by surprise, the location of the bottom was pretty well telegraphed in the charts earlier.  On October 4, I mentioned that NYA had captured its standing target from September 7 and wrote: "targets often act as support/resistance, so this could lead to a near-term bounce."  With that, I placed the 3/C label (with a ?) where it still sits today:

If memory serves, I actually wrote about this inflection zone months ago, predicting at the time that we'd reach the 3/C inflection with no overlap of the prior wave 1 high in SPX, leading to a time where everything was in limbo.  (I'd quote it here, but I don't have time to search that deeply at the moment.)

On the rally end, so far SPX did continue higher (as noted was possible last update) and has not overlapped blue 1 (SPX has a slightly different appearance than NYA):

COMPQ is still below blue resistance:

Bulls, of course, are clamoring for "their" count, so here's the most palatable "bull" count I can currently find:

In conclusion, the strength of the bounce has given many bears pause (paws?) and I'd be lying if I didn't say it has at least made me wonder.  This type of rally strength can sometimes indicate a meaningful bottom.  For the moment, though, there's nothing in the charts to invalidate any of the bear options, so I'm continuing to lean that direction for now.  Trade safe.

SPX, NYA, COMPQ: Not Just Financial

Way back in March of 2022, I wrote a bit more about the Supercycle collapse (which I believed/believe had/has already begun) in order to help get people thinking about the types of things that could happen, and to hopefully inspire them to prepare:

Bigger picture, the bear case hasn't changed, though I have included some ballpark numbers on the chart below. The question I always ask myself in parallel with such numbers is, "What would have to happen to take SPX to [for example] 2200? What is going on in the world as the market falls?" Because we have to remember, especially when dealing with Supercycles, that these things do not occur in a vacuum. If the market crashes, there are things going on outside the market that will be "causing" the crash. 

And when it comes to Supercycles, those events can be truly dramatic, as I've often discussed in the forum. During a Supercycle crash, the door is open to events such as major natural disasters ("big one" earthquakes, Cascasdia Subduction Zone tsunamis, etc.), world wars (or even something at a smaller scale but still massively devastating, such as a "backpack nuke" brought up through our less-than-secure borders and detonated downtown in a major US city), comet impacts -- things of that nature. Things that we tend to blindly assume can't happen in modern times, but most assuredly still do. Those types of events can, and usually do, run in close proximity to Supercycle crashes. 

Anyway, I don't mean to sound melodramatic, but when we start asking ourselves the question ("What could be happening in the world to cause the market to react so negatively?"), we probably won't like the possible answers. As I've always said: Charts lead the news.

Outside of that brief mention of "world wars" above, I don't think I've written about war much on the blog, but on the forums, I've discussed many times that wars are to be expected during Supercycle collapses.  Implicit in the idea of a Supercycle collapse is a shakeup of the world power dynamic -- especially when the collapse is occurring in the global superpower (the United States).  As America continues to weaken financially, economically, militarily, and morally, the Pax Americana naturally comes under fire as other powers look to capitalize on our weakness.

I have repeatedly warned that Supercycles take years, sometimes even decades, to unfold completely and that this bear market would not be like the other bear markets of living memory.  It's now been almost two years since the all-time high in SPX, and there's still a lot more to come, in my view.

During the first week of January (2023), I published the following thoughts:

I still remain of the opinion that this is the start of a Supercycle collapse, meaning that the worst is yet to come. Despite how some investors are undoubtedly feeling, in my view, things haven't even begun to get "bad" yet. We're still in the stage where bears are having fun (!). We'll know we're getting closer to the bottom when even bears are hoping and praying for good news and rallies, because everything will be teetering on the brink of complete destruction -- and not even bears want to see that. I likewise remain of the opinion that the current collapse is not solely a financial event.

We are more able to see the seeds starting to sprout a bit now, but we are still nowhere near the point where "everything [is] teetering on the brink of destruction."  We can speculate on what that might look like, but just remember that nothing is off the table for us during a Supercycle collapse.  Things that would have seemed impossible a few short years ago, such as a nuclear conflict, are no longer impossible.  

Supercycle declines are not just financial, they are cultural, and they are geopolitical.

To avoid negative consequences, we have to tread far more carefully than our leaders are currently doing -- but then, if they weren't arrogant and complacent, we might not have entered this Supercycle in the first place.  So, Catch 22.  Worth remembering that Rome grew so arrogant and complacent that its leaders refused to believe barbarians were capable of conquering them even after entire cities had fallen.  If our leaders were in touch with the times, they'd have a far more protectionist attitude about our finances and resources, instead of borrowing as if interest rates were still zero and lunging about clumsily as if the world was still stable and as if we were still in a position to do anything about the growing instability.  

Things have changed, but our leaders' attitudes have not.

Anyway, my point is not to be fatalistic, but simply to remind everyone that we're still in the early stages and things can get a lot worse than they currently are, so it's not a bad idea to prepare.  Don't be among the complacent.  Because we're nowhere near the bottom yet, in my opinion.  Whatever it is that you think can't happen, won't happen, would never happen here -- it absolutely can.  Plan as if it might.  Worst case (or best case?), you're overprepared and everything ends up fine.  No real harm done.

Let's move on to the charts.

NYA:

COMPQ:

And what currently appears to be the "most bullish" option for SPX (4 can run even higher than shown):

Of course, there are other options for the shape of blue 4 above, including the option to end immediately.  There are, of course, larger, intermediate bull options, but as promised, I'm not giving much airtime to them until the market gives better reason to.  Trade safe.