SPX and COMPQ: Upon Further Review...

In the last update, I suggested that the rally probably needed "at least two 4/5 unwinds higher."  My confidence in that has fallen significantly.  Let me show you why, starting with SPX's near-term chart:

Upon further examination and deeper study of ES (e-mini SPX futures), I cannot rule out the black count.  And the black count would have already completed the requisite fourth wave.  So that's one reason I'm stepping back from the "needs more fourth wave" call (though I still slightly lean that way).

The other is COMP, which I showed last update and which looked like IT needed another high... and it still kind of looks that way, but whether it does or not, COMPQ and SPX haven't exactly been moving in lockstep, so SPX does not need to follow.

In conclusion, this is a low-confidence market right now and I'm struggling to find anything that's high-confidence actionable, so the best we can do is know the options to have a jump on them as it develops.  Trade safe.

SPX and COMPQ Updates

Way back on June 17, I wrote:

I do suspect that if SPX forms another scary wave down, this is probably not the end of the bull market yet, based on INDU and NYA.

We never even got another truly "scary" wave down -- so that call, at least, was easy.  Pretty much nothing else about this market has been.

Friday's update warned that, after a string of near-term wins, the pattern had taken us as far as it could and that things were now up in the air.  I attempted to heavily underscore that warning with:  

"The simplest version of this pattern is potentially complete -- so further lows are OPTIONAL but not NECESSARY."

Friday's update as a whole intended to convey that the market was behaving, as that update so eloquently put it, "insane."  

Monday's update then attempted to detail the potential triangle that was, at that time, still on the table as one of the "2,896.5 potentially valid near-term patterns" (Friday's quote).  The triangle turned out to be a no-go, which we knew for certain the very instant SPX broke above 7581.50 (this level, too, was discussed in Friday's update).  

And as I also wrote Monday:

Ultimately, bulls are basically just looking for SPX to make a new all-time high, which would reset most of the bear options and give bulls a clean slate.  

So on Friday and Monday (before the session), while we didn't know what the market would do next, we at least knew that we didn't know -- and tried to convey that clearly.

It now appears that the rare bull pattern discussed on Friday was probably the pattern we were in:

The more bullish option (not shown) would be that we just lived through a rare RUNNING flat (where the wave C decline fails to break the wave A low) and the decline is entirely over, with SPX headed to a new all-time high.

Rare patterns are, by definition, unusual (obviously), so the tough thing is: you can't bank on a rare pattern.  That would be like betting the coin flip will land on the edge of the coin instead of on heads or tails.  Sure, it happens.  But rarely.  The best you can hope to do is identify such patterns when they're possible -- and get out of the market's way when ambiguity is high (or hedge heavily, if you know what you're doing and understand that hedges will go to zero if the market keeps grinding).

COMPQ is the most interesting chart out there:

In conclusion, the triangle died during Monday's session and bulls ran with that on Tuesday.  This is now the type of market that's best served by just drawing an uptrend (melt-up) channel and not even giving thought to countertrend trading unless the market can sustain trade below it (and maybe not even then -- countertrend trading is often brutal, as we just saw).  Trade safe.

SPX Update: Needs More Cowbell

Last update had no hard predictions -- and those was a hit (wait, what?).  This update will detail some of the details in more detail, in as detailed a fashion as I can manage while also finding a way to work the word "detail" into this sentence again.

Let's start with the complex triangle.  This first chart is the chart we've all come to know and love through these many moons -- a chart that needs no introduction. 

The second chart is more... detailed.

This next chart shows how the complex triangle (if that's what this even is) might play out:

This third chart shows the current micro count.  If this wave is part of a triangle, it should remain an ABC.  If it becomes impulsive, that would leave the old WXY count and a b-wave low (with the next wave down to be a third wave) (that count can't exceed 7582)... or bull options.

Let's add more detail to the details detailed above:  In the event this is the complex triangle, it's worth knowing that it would NOT be long-term bearish.  It would be near-term bearish -- but because triangles are virtually always penultimate waves (4th or b waves), it would strongly suggest the larger decline from the ATH would remain as an ABC, with new highs to follow.

The most bearish count going right now would be the WXY with that last decline as wave 1 of C or 3 down and the current bounce as 2 up.  That count would offer at least some longer-term hope (not promises, but hope) to bears, were it to play out.

The bull counts are varied -- and largely redundant, because they all end with "stocks go up."  There is one obscure "bull" count that ends badly, and that would be if this were an ending diagonal in progress, destined for one or two more highs before falling off a cliff -- but we'll worry about that if the pattern says we should.

Ultimately, bulls are basically just looking for SPX to make a new all-time high, which would reset most of the bear options and give bulls a clean slate.  

So those are the details as they sit at this exact moment in time.  Trade safe.

SPX and INDU: Three Hits in a Row -- Now it Gets Tough Again

Today's Question of the Day comes from long-time reader Hubert "the Hammer" Spankle, who writes:

Dear Mr. Logic,

Is this market insane? Or what?

Sincerely,

Hubert "the Hammer" Spankle

Well Hubert, I think you've hit the nail on the head (hence the nickname?) -- and many traders are, in fact, wondering the exact same thing.  The short answer is: yes.  Yes it is.

One of the best charts we've had during the past couple weeks of insanity is INDU, which has helped keep us sane -- by keeping us looking the correct near-term direction.  

But INDU's chart has now potentially completed what it needed to and isn't offering any further hints -- as of this exact moment, anyway.  In the event it sustains trade at a new low, that could actually kick off a decent decline (as that would, presumably, be wave 3 down of a larger 3 or C down), which would likely take us down toward ~50k or below.  More details on the chart:

Moving on to SPX, there are no less than 2,896.5 potentially valid near-term patterns at this exact juncture... but the more complex triangle is still very much in the running, largely because the last two legs down have been very start-stoppish (not a word), which is inconsistent with typical impulsive declines.  Not impossible, of course, but inconsistent.  The chart below discusses this in more detail (triangles can be ugly, so this is intended for over 18 only. NSFW.):

The more immediately bearish option (not shown) would be that this week's low is a b-wave, and new lows will be forthcoming as soon as the c-wave bounce completes.

The more bullish option (not shown) would be that we just lived through a rare RUNNING flat (where the wave C decline fails to break the wave A low) and the decline is entirely over, with SPX headed to a new all-time high.

That's about all the news that's fit to print at the moment.  Trade safe.

SPX and INDU: And She's Buying a Stairway to...

Last update concluded with:

Monday's update was ["wave" was a typo] directionally correct on two fronts (SPX's projection showed the market heading up, then down, which it did) and this may be the start of blue C down... but due to the bounce at lower red, the market has kept its options open for now.  If bears can sustain trade below lower red, then the probability that wave c down is already underway will increase. 

And while Monday's session opened with the market dropping like a lead zeppelin, bulls managed to hold last week's low, leaving the above quoted paragraph in full effect.

INDU ran with the "this looks like it might be a b-wave low in progress" thing I grumbled about in the last update and bounced up to 52.9k.

In conclusion, SPX is in more or less the same place it was last update, so all of that still applies.  Trade safe.

SPX and INDU: Market Performs as Expected -- But Withholds Confirmation

Monday's update noted:

INDU did break the low I flagged as likely to be broken, but the wave is still a little shorter than ideal.  Not impossible for it to end there, but normally I'd think it's either not done yet or something along the lines of the black sketch is in store.

INDU has since made another low, so it was indeed "not done yet" (worth noting that the black sketch referenced above also ultimately projected lower prices, so the options were "down now, or down later"):

SPX managed to drop right down to the inflection zone I mentioned back on July 7 -- and bounce.  Which means bears do not yet have confirmation that the next "real" wave down is underway, and the annoyingly complex correction could continue if the market wants:

Near-term SPX below... recall that on July 13, I noted that other versions of the triangle were possible -- those other versions are one of the things keeping some of the ambiguity alive for now.

In conclusion, Monday's update was directionally correct on two fronts (SPX's projection showed the market heading up, then down, which it did) and this may be the start of blue C down... but due to the bounce at lower red, the market has kept its options open for now.  If bears can sustain trade below lower red, then the probability that wave c down is already underway will increase.  Trade safe.

SPX and INDU: INDU Hits First Projected Target, What Now?

The market has continued to be exceptionally weird, but so far, it's performed in-line directionally with the WXY count.  The chart below outlines some contingencies looking out into the future, since I'll be taking some personal time on Wednesday and Friday and the updates will return on Monday.

INDU did break the low I flagged as likely to be broken, but the wave is still a little shorter than ideal.  Not impossible for it to end there, but normally I'd think it's either not done yet or something along the lines of the black sketch is in store:

In conclusion, I've tried to cover the bases in the event the WXY goes off the rails, but so far, it's done what bears would hope.  That doesn't guarantee anything, especially as strange as this market has been, but it's obviously preferable to it having blown through the ATH and ignored the count entirely.  At least the inflection zone was good.  I'll see you on Monday -- trade safe.