TLT and SPX: Time to Update the Bull Count from 6 Months Ago

Back in June, I published the following bull count, which was roundly ignored, so I figure now's as good a time as any to check in on it and update it:

Let's also not forget that SPX still has this long-term overhead trend line to contend with:

Finally, TLT has continued bouncing after hitting the noted support zone:

Not much else to add.  SPX has managed to rally above horizontal resistance at the prior 4607 high, so we'll see if bulls can hold that.  Trade safe.

SPX and BKX: Caveat Subscriptor

There are two major aspects to what I present through these updates:

One aspect is the technical side of things, typically in the form of Elliott Wave counts, which are based on a combination of concrete patterns and gut instinct, in which I (almost) always present both sides of the trade.  The other aspect is something readers always seem to want (often even when I haven't offered it), which amounts to "okay, but which way are you leaning?"  That aspect is typically based on a combination of technicals, fundamentals, and, of course, gut instinct.

None of it is foolproof, but let's examine a recent case in point, because it illustrates the conundrum well.  For months leading into the recent swing low, my charts pointed to that price zone, often with the label "3/C" (or "C/3," same thing).  That was my technical (mixed with some gut instinct) read on where we were headed for the immediate future.  In Elliott Wave, a C-wave always represents three down (or up), which is always an inflection zone -- though in this instance, I further mentioned that my lean was that we'd go on to form five down.  That lean was based largely on the seemingly-awful fundamentals that the market faces, but that lean turned out to be in error.

What was not in error was the location of the inflection zone (SPX 4090-4115; in fact, the market nailed it dead-center).  It's just that many of us (including me) thought that wasn't going to be the end of it.  As I wrote on October 26 (in an update appropriately titled:  Now Entering "Bounce or Break" Territory):

Yesterday, SPX came within 7 points of its preferred target zone, which also puts it into the C-wave inflection zone (not that I'm expecting this to be a C-wave, but I'm not always right, so I never ignore things that run counter to my biases):

That was followed by this chart: 

So on the one hand, the technical aspect worked flawlessly in this case -- but my lean that we'd go on to form an impulse did not.  It's important to understand the difference between those two things -- my lean is always an xx% vs. xx% proposition; it is NEVER, EVER 100% vs 0%.  Never.  Usually pretty far from it, as it's usually 5x% vs. 4x% (i.e.- 53% to 47% or similar).  

Even the technical aspect isn't 100%.  (Nothing I believe about anything is 100%, for that matter, at least as far as I'm concerned.)  I feel like I've made that pretty clear over the years, but in case I haven't, there it is again.

In this instance, I probably needed to focus more on the warnings and caveats for bears.  I covered them a few times, but probably didn't highlight them enough.  

Below, I intentionally left the labels on this chart as they were -- next update I'll delete the 1/2/3, since we know now that it was the A/B/C portion of those labels.

Anyway, I'll try to caveat more in the future.  Usually I'm pretty good about that, but I don't think I did it enough at this last inflection.

Beyond that, I really don't have a lot to add here about the current market -- I'm still awaiting an impulsive turn, as I have since I wrote about that publicly on November 8 (we had one quick little false alarm since then, but after it shook out, it was back to waiting).  Until then, there's not much for bears to sink their teeth into, and the market could run higher in the meantime.  As mentioned last update, BKX (and many other markets) has/have reached resistance, but that doesn't mean the market won't break through it:

Trade safe.

BKX, NYA, COMPQ, etc. Updates: Vive la Résistance

The market continues its sideways grind, so not much to add overall, but I do want to note that BKX, too, has now reached resistance, just overhead:

So it joins NYA, which hit resistance a little earlier (as mentioned previously):

And COMPQ:

And, of course, INDU (also noted previously) and SPX (no new chart needed), which is in the resistance zone of the prior high (also noted previously).  So, we'll see if resistance resists or not, but most major markets seem to have reached it together (in some cases, it's a little higher than the market's current prices).  Trade safe.

SPX and NYA Updates

The market has traded sideways for a week, so there's not a lot to add to recent updates.  I realize that it's fashionable to be bullish now, so I've drawn up a bull chart for sake of reference.   

Again, as I've discussed previously, I think if that bull count does show up and give us a new ATH, it probably doesn't get too much further than that, because the option of this rally to be the first subdivision of a new massive bull wave just seems silly to me.  But hey, maybe I'm wrong.  Here's the chart I published on Dec 1, discussing this:

Of course, everyone seems to be presuming that a new ATH is just a given in SPX, and while I agree it's possible, I don't think it's automatic.  In the event it doesn't materialize for bulls, here's an interesting chart to watch for as long as it's relevant (it could always become irrelevant by the end of today's session -- or not):

In conclusion, I continue to maintain that in the big picture, while it's entirely possible I was a wave early, I don't see many positive developments coming down the pike (to the contrary, pending Treasury supply alone is going to suck a ton of liquidity out of the market), which is probably what I'd need to see to convince me I was way off.  I'm open to change if the playing field changes materially -- but so far, it hasn't.  Trade safe.

INDU Update: Blast from the Past

Remember when (28 minutes ago) everyone was talking about the yield curve inversion?  I'm sure you do, but just in case you're new to the markets:  An inverted yield curve has accurately foreshadowed all 10 recessions since 1955, per the Federal Reserve Bank of San Francisco, with only one false positive in the mid-1960s.  

So, is "this time" really different?  Will this be the first outlier in ~60 years, proving all those who heeded history wrong?  

Or is the market/economy (yes, I very much realize those are two separate entities, despite the slash mark, and have written about that extensively) just biding its time?

INDU is approaching an interesting very-long-term trend line:

Here it is zoomed in:

And here's an even closer look, along with a trend line that's only months-old (in blue) instead of decades-old:

I suppose if we get into a bigger bull move, then it's entirely possible we're experiencing a "bull market in short covering."  Since most everyone who hasn't been hiding under a rock during the past year and a half knew about the yield curve inversion (along with many of the other fundamental challenges facing the market), maybe there were just too many shorts for bears to get traction.  Maybe those needed to be cleared out.  Maybe even more clearing out is necessary.  

We'll see if the market responds to this resistance, or if it blows through it.  Trade safe.

SPX Update: Let's Take a Serious and Critical Look at the Bull Count

In all my years trading, I have never seen bears so demoralized and discouraged as they are right now.  NEVER.  As most experienced traders know, usually bulls are most demoralized near major bottoms, and bears are most demoralized near major tops.  In both cases, sometimes there's a final "washout" wave that crushes the last of the strong hands (bull or bear).  Make of that what you will.

Let's step back and take a serious look at the count bulls are banking on.  I mean, let's really try to envision this... and afterwards, we'll project what sort of things might need to happen at the fundamental level for this to work:

For the above count to work fundamentally, here are some things that probably need to happen:

1. Inflation needs to stop, obviously.
2. Rates need to come back down to somewhere near the lowest levels in history [which is where they were during the prior bull market], in order to again fuel some degree of debt expansion.
3. Commercial real estate needs to come back from the edge, and rates coming down would only be part of that equation:  People also need to return to working in an office and quit this remote stuff.  People also need to stop shopping online so that brick and mortal stores can make a significant comeback.
4. Treasury buyers must be found, in order to fund the rapidly-growing national debt and to help bring Treasury rates down, because it's hard to bring rates down when there are barely enough buyers to absorb supply.
5. China needs to find a way out of its pending demographic crisis, in order to keep buying Treasuries and in order to keep manufacturing cheap Widgets for us.  And also to prevent their highly speculative real estate market (which already features numerous literal "ghost cities") from melting down and causing any degree of global contagion.
6. American consumers need to get out of debt and start spending and taking on new debt again.  The problem with a lot of this stuff is "it only works once."  You can't max out your credit cards AGAIN until you pay them off.
7. GDP needs to increase substantially and in a real manner, since all recent "rises" in GDP have been fueled solely by the government borrowing and spending (see: Treasury oversupply, etc.).  Again, seems hard to do when everyone else is already tapped out, but no matter, it needs to happen to fuel that bull market.
8. Banks need to strengthen their balance sheets.  Of course, if commercial real estate recovers somehow and Treasuries come down substantially and mortgage rates come back down (so that banks aren't stuck holding all those 3% mortgages, which are a liability in the current environment), then banks will probably be just fine.  The problem is:  How do we get those other three things to happen?

This isn't even an exhaustive list of the fundamental challenges bulls are facing. 

So, for sake of argument, let's assume bulls can manage to make a new all-time high in SPX in the coming months (and that outcome is not a given -- in fact, it's not even a given that SPX will break the July highs).  But in that event, given what we know about the fundamental environment, this is what would look more reasonable to me:

In conclusion, is it possible I was "a wave early" in my long-term count?  Absolutely, it's an easy error to make and most of us do it at the micro level fairly regularly.  Is it likely I was WAY off and the black mega-bull count will show up?  You be the judge.  

Near-term, keep in mind that SPX is still sitting at/below resistance, via the July highs.  Trade safe.

SPX, NYA, OIL: The Grass is Always Greener -- When You Aren't Standing on It

Not a lot to add to the past several updates, but I have some interesting charts today nonetheless.  Let's start with INDU's very-long-term chart:

Next, a bit of a different perspective on SPX:

NYA highlights this even further:

Finally, oil has remained stalled at its inflection point for a few weeks now, and presents some interesting options from here:

Worth mentioning that we are closing in on the July high in SPX, and prior highs can sometimes offer resistance.  Btw, the "grass is always greener on the other side" because our very presence on the grass changes both its environment and ours, so unless we take proper care to nurture and sustain it, trapsing about casually ultimately kills it.  Not much else for now.  Trade safe.