INDU Update: Two Charts = the Market a Nutshell

Let's just look at two charts today, because these two charts sum up the overall situation.

First is a chart we've looked at recently:

On the chart above, INDU could run higher and still be in the diagonal -- the rule in an ending diagonal is that the length of wave (iii) cannot exceed the length of wave (i), and INDU is nowhere near violating that rule yet.  You'll notice I did not specify "contracting" ending diagonal -- I did this because after ~25 years of charting with Elliott Wave, I'm still not convinced that "expanding" diagonals actually exist.  I think one can usually find another explanation when one is tempted to employ an expanding diagonal.  

So, much as I do not recognize Disney's abomination of a trilogy as actual "Star Wars," I do not recognize "expanding diagonals" as legitimate patterns.

Next up is a closer view of INDU, which I began calling attention to in early January, as this chart summarizes the issue:

In conclusion, this market long ago detached from fundamental reality, so to my way of thinking -- at least for the time being -- it's just a matter of following the trend until we get another impulsive decline to signal a possible short-term (or longer term, if it's a larger impulse) trend change.  If one looks back to last update, one can see it is possible that SPX is getting close to wrapping up a smaller fifth wave, so a correction this week is not out of the question -- just not willing to front run it from an analytical perspective, since it's an ambiguous pattern.  Trade safe. 

SPX and COMPQ: Irrational Exuberance

Since last update, COMPQ captured its target, but SPX fell short.  Markets are rarely rational, and I learned to accept that decades ago as a trader -- but I have to say, this particular market is a frustratingly irrational market.  The fundamental macroeconomic picture is vastly different than the late 1990s, but as far as the market's behavior if judged as if in a vacuum, in a weird way, I might be tempted to say that's the closest analog I can find in my own personal experience.  The tail end of the dot.com bubble, when "irrational exuberance" ruled the day.

One huge difference in the macroeconomic picture is, of course, the massive debt facing both the U.S. and the world... and being overburdened by debt rarely ends well.  WSJ has had some interesting coverage of this lately, reporting that interest payments alone over the next 10 years are projected to exceed $12 trillion dollars.  This year, servicing the debt (interest alone) is already going to be third largest expenditure, behind only Social Security and Medicare:

Interest payments have exceeded the national defense budget for the first time in history:

The current trajectory is simply unsustainable:

But hey, that probably won't be an issue for a few more minutes, so BUY, MORTIMER, BUY!  

Anyway, here's COMPQ, which behaved well:

And SPX, which behaved like a crack addict:

In conclusion, the market clearly wanted a simple correction either way, so not much to add beyond all that.  Trade safe.

SPX, COMPQ, INDU, BKX: Confirmed and Almost Confirmed

Since last update, COMPQ confirmed its count and the (then presumed, but since confirmed) first impulse down:

SPX went the right direction, but has so far held above the low of the prior (presumed) impulse down:

INDU continues to show that bulls probably still have the long-term ball (for now), but bears do have two intermediate options that could generate large declines in the meantime:

Below is BKX, and again, this is not a "prediction," just a reminder to the most bearish possibility.  The most bearish BKX option could pair with either of the intermediate bear options in INDU:

In conclusion, the market has behaved as expected so far, though I'd like to see SPX capture its next targets as well.  Trade safe.

SPX and COMPQ: As Good as Bears Could Hope

Last update's call for the 1/A low in SPX and COMPQ was good, and both have rallied up to their respective target zones.  COMPQ ran right to its 2/B label:

SPX ran a hair past its zone:

Interestingly, futures are down pretty solidly right now, presumably on the breaking news that cOmPUter mODels suggest that the Atlantic Ocean will ultimately close, which will devastate the East Coast tourist dollar and the local economies that depend on it.  Can't go to the beach if it's closed!

Also, inflation seems to be picking up again, so futures probably don't like that, either.  Core PPI was up 0.50% vs. the estimated 0.1% that was projected by people who have all their shopping done by servants.

Anyway, this is where bears wanted to be, and patient bears who waited for the suggested targets were rewarded with reasonable entries.  No guarantees that the market doesn't pull something funky, since, frankly, nothing surprises me from this nutzoid market anymore, but it's as promising a near-term setup as bears have seen in months, so we'll see if they can do anything with it.  Trade safe.

SPX, COMPQ, INDU: Nailed It, Go Figure

On Friday, my last real update (pre-illness generated fever, that is), I wrote:

Last update discussed that the market likely needed a few more highs before it could enter an inflection zone, and if the gap up in futures sticks, we'll be getting into that zone today.

We then ended up making one more high on Monday (before reversing all of Monday's gains), but I can't call it much better than that.  By all rights, the decline does appear to be impulsive, so any intrepid bears now have a zone to act against (north of the all-time high would suggest that impulsive decline was the c-wave of an expanded flat).

Note on the chart below, I sketched in 2/B as a gap fill, but as a corrective wave, 2/B can run higher or lower than that.  Its only hard rule is that it can't break the red 5 high.

COMPQ ended up dying right at the median channel line, just as I'd predicted a week ago:

Finally, INDU reminds us of the most bearish potential here, but again, this is "only" that at this stage; it's far too early to say if it will be this bearish or only be a short-lived correction:

In conclusion, while the INDU chart shows the most bearish potential and the (iii) target label, which was added back on January 8, was ~reached, please keep in mind that the correction could always just be a simple ABC as shown on the COMPQ chart.  While it seems reasonable to think we'll get at least one more wave down, it's too early to say if that will then go on to develop into a still-larger impulsive decline, but we'll keep an eye out as it develops.  Trade safe.

COMPQ and INDU: MDF Monday

Yesterday, I came down with the aptly named Martian Death Flu (okay, that name is made up; but it's NOT Covid, likely just a bad sinus infection) -- the first time I've had a head cold in like 5 or 6 years.  Now, I'm not telling you this for sympathy, I'm telling you this because I've been running a fever on and off and have been generally feeling like I was run over by dump truck, so today's update is just going to be a couple of updated charts with nothing in the way of new commentary (I feel like giving market reads with a fever is probably irresponsible).  I debated "calling in" today and not doing an update at all, but that's not really my style.

COMPQ has run farther into its target zone:

INDU still has a shot at this pattern -- but again, keep in mind it could be much more bullish than this, if this is a traditional third wave:

So, not much to add -- but I do want to remind bears that it's entirely possible for the market to blow through this first inflection zone, so (as I've said many times before), awaiting an impulsive decline is not a bad strategy.  Trade safe.

SPX, COMPQ, INDU: The Lower Edge of an Inflection Zone

Last update discussed that the market likely needed a few more highs before it could enter an inflection zone, and if the gap up in futures sticks, we'll be getting into that zone today.

That said, keep in mind that this is not a "guaranteed" reversal zone, merely a potential inflection zone.  The market reserves the right to tack on extended fifths and the like if it so chooses.  For that reason, cautious bears may want to await an impulsive decline before getting too aggressive.

SPX hit the "5" target zone (from Wednesday's update) in the overnight session, but has since fallen back a bit:

Finally, INDU is now very close to the (iii) label from January.  This shows one option that could give bulls a headache, were it to play out:

In conclusion, last update's call for multiple new highs was good, but we may not know for several sessions yet whether bears can do anything with this inflection zone.  Trade safe.