SPX Update: Bulls Do Their Job

For the past two weeks, we've been watching to see if bears would break support or not (I stressed how important that was to any bear thesis), writing on June 12: But before we even consider going there, let's see how bears handle these potential support zones first. 

And then driving it home again on June 14:  If it sustains trade below dashed red, then solid red becomes the next target (and sustained trade below solid red would then target ~5767).  But lest everyone get too focused on the lower levels -- remember, bears do have to punch through dashed red first.

And then basically repeating "no change" in each subsequent update.  And, in the end, bulls held the zones they needed to (SPX traded below dashed red for literally about a minute, never broke solid red, and then shot up like a rocket).  This means the uptrend remains solidly intact for now:

I'm going to republish this very long-term chart, because it's worth keeping in mind:

In conclusion, there remains nothing for bears to sink their teeth into and the uptrend continues -- at least for now.  As theorized, the identified support zone proved to be pivotal -- so we'll keep watching for changes if/when they occur.  Trade safe.

SPX Update: From Near-term to Long-term

Over the weekend, Jay Powell took out some of his frustrations on Iran -- though he's since expressed sincere regret, stating he thought he was launching nukes, not destroying them.  He further stressed that the Fed has the "tools" needed to handle any escalation, should it occur, including the ability to launch a "bunker busting" QE strike against any and all hostile powers.  Powell also hinted at plans to bring Ben Bernanke out of retirement, so he could drop helicopters-full of devalued currency directly onto strategic locations.  

In a separate interview, Bernanke stated he was ready to answer the call -- and that he was fully capable of drowning Iranian oil wells in "eleven years worth of beard clippings," should the need arise.

Let's all pray it doesn't come to that.

In other news, SPX continued doing nothing -- but it has now formed some interesting potentials.  Let's start with the first key chart:

Now let's look at the near-term, where things are showing the POTENTIAL to get interesting in the event bulls can't turn things back up:

Finally, I showed this chart last month, but I didn't elaborate on the implications... because they're mostly contingent at the moment -- but still worth knowing:

In conclusion, the near-term pattern in SPX would call for heightened bull caution in the event it were to sustain a breakdown.  Beyond that, the caveats and warnings of last week's updates remain in effect.  Trade safe.

SPX, NYA, and Powell Updates

On Wednesday, The Gnome Jerome emerged from his garden and announced the Fed would not be raising rates, cutting rates, or tracking crime rates.  "In fact," he said, "we will no longer even be using the term.  From now on, it will be known as That Federal Funds Thing, and it will be expressed as a trinary fraction."  

Powell bitterly took a few questions, refusing to even clarify what the current Federal Funds Thing is, except by shouting, "I'll give you a hint: it starts with 11!"  He then laughed maniacally and left.

The market initially reacted with confusion, then (as reports streamed in from mathematicians) realized that nothing had actually changed and sold off, before stabilizing a bit lower to end the day.

Which means SPX is still holding its first key zone and hasn't revealed anything new despite The Gnome's offbeat comments:

NYA has continued to sustain trade below its first zone:

As I said last update:  

We'll see if [NYA] is a warning to bulls (it may be)… or a red herring (since SPX is the stronger barometer, and it's still holding its key zone).

The practical implication from the behavior in NYA is that NYA seems to suggest that if SPX can sustain trade below its first support zone, it will then most likely reach its next downside target (the lower boundary of the red channel).

Beyond that, nothing much to add to the prior week's worth of updates -- those warnings and caveats still stand.  Trade safe.

SPX and NYA: Trading in Circles

SPX has traded in a circle since last update, bouncing off dashed red support, then ending up reversing and closing near it again.  Which makes this now the THIRD consecutive update where nothing in the outlook has effectively changed.  Which makes finding new and interesting things to write about rather challenging.

NYA managed to bounce over the blue line, then ended up back beneath it -- so we'll see if this is a warning to bulls (it may be)… or a red herring (since SPX is the stronger barometer, and it's still holding its key zone):

In conclusion, rather than reprint the exact same series of warning and caveats that I've said in the past two updates, I'd simply refer everyone back to Sunday night's update if you forgot them.  Trade safe. 

The Market Doesn't Owe Us 'Certainty'

Why Probabilistic Thinking Is Hard (but Essential):

How to think about markets, risk, and adaptation.

A common misunderstanding among newer traders deserves attention — not just because it trips up beginners, but because it points to a deeper reality that even market veterans sometimes forget.

Market analysis is, first and foremost, about interpreting potentials and probabilities. There is no such thing as a "sure thing" when it comes to trading and investing. The analysis I favor, Elliott Wave Theory, allows me to assess the structure of the market and then project likely outcomes: "If the market does X, then it's likely to do Y." These projections are probabilities, not guarantees.

Veteran traders already understand this. But for those newer to markets, the best parallel I can offer is poker. If you’ve played, you know that over time, probabilities work out according to the law of large numbers. A strong hand might lose six times in a row, leading you to conclude that the universe hates you… then it wins 15 times in a row. That doesn’t mean the probabilities were wrong. It means the distribution played out.

That’s why no one should ever trade as if their analysis is perfect — because probabilities never are. Even if one could read every pattern perfectly, the nature of probabilistic systems means that sometimes the lower-odds outcome will still occur.

That’s what stop loss orders are for. One advantage to Elliott Wave is that it typically provides clear areas for invalidation.

But the key understanding — for all forms of analysis — is that markets are not static pictures to be labeled and filed away; they are dynamic, recursive systems always in motion. Patterns should not be treated as fixed destinies; they are simply possibilities still unfolding, always subject to change.

Too often, analysts will classify a formation — “ending diagonal, therefore bearish” — and let their thinking stop there. But effective market analysis requires a live, continuously updated decision tree: every pattern may morph, extend, or nest within a higher-order wave as new data emerges.

Patterns exist temporally, sometimes only partially formed — not as fixed objects occupying finite space. So that apparent “bearish ending diagonal” could instead be the early phases of a still-developing bull nest… and so on.

Fractal analysis — such as Elliott Wave — demands that one hold multiple scenarios open at all times. The prudent approach is to model not just what seems most likely now, but what could become likely if the structure shifts.

If X occurs, it may confirm scenario A, or
if Y, then B
yet there is always the possibility of Z — a branch that could suddenly dominate, even if it was once improbable.

This is not a weakness in the method, but a recognition of the underlying reality:

Ambiguity is the natural state of complex systems.

The market punishes those who seek comfort in “sure-thing” predictions or who collapse all potential paths into a single, rigid narrative. Insistence on black-and-white answers may feel reassuring, but it fundamentally misinterprets the system. The real skill lies in embracing uncertainty — keeping multiple branches alive, updating models as new information arrives, and remaining responsive to the evolving structure.

People don’t like to do this, because it’s cognitively demanding. This is why we prefer to collapse uncertainty into certainty (and not just in markets; in everything): Holding multiple possible threads open at once can make us feel ungrounded — and the more threads, the more ungrounded.

Yet in a dynamic, ever-shifting environment, the map is always provisional.
And success depends on the ability to adapt rather than the hope for certainty.

The bottom line is this: The market isn’t a clock. It doesn’t tick along with rigid, mechanical predictability. It’s a dynamic mechanism that shifts with every new key reversal or confirmation.

What appears possible today may become impossible tomorrow. And the thing is, given the reality of a dynamic market, all valid forms of analysis must evolve in response.

Even fundamental analysis has to adjust. Imagine analysts project Apple will sell 40 million iWidgets next year — and then a recession hits and sales fall short. That analysis must revise its expectations. The underlying thesis changes with new data.

But it’s human nature to want to dumb everything down. To make it black-and-white. To seek simple answers that let us go back to watching Netflix or arguing with nimrods on X.

Unfortunately, markets — and life — don’t work that way.

If you're here to learn how to better engage with a complex system, then welcome.

But remember: Even the best analysis isn't about certainty.

It's about mapping the uncertainty.

And, perhaps even more importantly: Trading itself is about managing one’s risk accordingly.

SPX and NYA: Cracks Forming -- But Will It Actually Break?

No change since last update, except to note that SPX has reached its first downside target-slash-potential support zone.  If it sustains trade below dashed red, then solid red becomes the next target (and sustained trade below solid red would then target ~5767).  But lest everyone get too focused on the lower levels -- remember, bears do have to punch through dashed red first.

NYA has fallen through its first support line -- bears need to hold that:

In conclusion, the first crack appeared on June 10, and cracks are continuing to spiderweb across the charts -- we'll see if the glass breaks on bulls or not.  But if it does, again, please keep in mind what I discussed last update:

That said, be aware that IF the highly speculative 1?? and 2?? on the near-term SPX chart happen to be unfolding, then these early downside targets might be VERY conservative.  Because if this is a second wave decline, then its job would be to convince everyone that the bear market is resuming -- which implies a deep and scary decline, potentially of 500 points or more.

And it also bears mention that SPX did not reclaim its all-time high -- which means that if the decline gets teeth, then it's not outside the realm of possibilities that the bear market IS resuming, so we should be aware of that, as well.  But before we even consider going there, let's see how bears handle these potential support zones first.  

Trade safe. 

SPX and NYA Updates: What to Watch Next

Last update called attention to a rising wedge that had only just formed in multiple markets, and it turns out that rising wedge was (likely) true.  So now you know for sure that, despite how boring the market has been for weeks on end (and the temptation toward complacency that comes with that), I haven't just been sitting around thinking up backhanded ways to insult our fearless leaders, but have never stopped watching the charts with vigilance -- while at the same time also thinking up backhanded insults.

Which, of course, is the gold standard of quality that long-time readers have come to expect from this publication.  And which isn't as easy as it looks -- after all, you don't see Morgan Stanley dreaming up new ways to insult Fed Chairmen, do you?  And they have entire teams of people working on this stuff -- yet all they can manage to do is occasionally guess the general direction of the market while maybe offering some vague policy critique. 

Anyway, I digress.  The point was, the insults aimed at the Federal Reserve the rising wedge turned out to be true -- or at least, that's what futures are strongly suggesting as of the time of this writing.

There are still some remaining hurdles for bears, though (particularly in the cash market charts), so we'll take a closer look at those in this update.

First up is NYA.  We can see NYA fell out of the wedge, but so far, it simply tested the blue line, which is the first bear hurdle.  Of course, if the big drop in futures holds, then NYA is likely to open below that line -- but there are still ~4 hours until the open, so lots can happen in that time.  

Presuming NYA does open below the blue line, then bears will need to defend that line and turn it into resistance.

Next up is the SPX near-term chart -- which also references the chart that follows after this one:

Here's the intermediate chart:

In conclusion, bears have done the first step, but there's still more to accomplish in the form of cracking support before we get too excited.  That said, be aware that IF the highly speculative 1?? and 2?? on the near-term SPX chart happen to be unfolding, then these early downside targets might be VERY conservative.  Because if this is a second wave decline, then its job would be to convince everyone that the bear market is resuming -- which implies a deep and scary decline, potentially of 500 points or more.

And it also bears mention that SPX did not reclaim its all-time high -- which means that if the decline gets teeth, then it's not outside the realm of possibilities that the bear market IS resuming, so we should be aware of that, as well.  But before we even consider going there, let's see how bears handle these potential support zones first.  Trade safe.