SPX and INDU: Charts from an Alternate Universe

So I'm going to start off by cursing one of my charting services, whom I won't name directly (rhymes with "Fading Shoe"), for giving us a bum price chart.  It turns out the the "BREAK" of the prior low, as shown on that SPX 24 hour chart, was not something that actually happened in this universe and was potentially bleeding over from an alternate reality wherein Dave Barry won the presidential election and Tuesdays were declared a permanent national holiday.  This nonexistent BREAK actually influenced my read on not only Monday, but on the prior Friday (though I didn't mention it on Friday; I simply noted it in my mental model).

Thankfully, I didn't allow it to overrule everything else -- but it did play a factor in my weightings.  Thanks to forum member "porkchop" for calling it to my attention.

Anyway, last update noted that bulls should be cautious in the event of a sustained breakdown -- but that didn't happen anyway, so it was kind of a moot point:

So on the chart above... yes, bears could still get another wave down.  BUT, INDU now presents a bit of a monkey in the works for bears (I figure a monkey is probably more trouble than a monkey wrench):

Finally, SPX is still within the red channel:

In conclusion, I'll simply reiterate the conclusion I first issued on Oct. 13 and have been reprinting since:

[T]he bottom line is, from a technical Elliott wave perspective, nothing has happened yet and this could just be a particularly violent fourth wave.  Even from a standard TA perspective, this could just turn out to be an expected test of old long-term resistance (second chart) before the market moves higher again.  In other words:  While this could turn into something more significant, it's tempting but simply premature to assume that will happen just yet.  Let's first see how the market handles the levels that actually matter. 

With the additional note that now INDU is suggesting the "particularly violent fourth wave" has gained additional credence.  Trade safe.

SPX, ES, and INDU Updates: Not Ideal

Last update reiterated last Monday's note that technically, no key levels had been broken yet -- but then added the following warning:

That said, unless bulls can sustain a breakout over 6723, we do have to respect the three-wave nature of the rally and maybe give a slight edge to bears for the time being.  (Do note that there's also one bear pattern that breaks 6723 briefly before getting ugly, so even 6723 isn't a complete failsafe for bulls.) 

Let's take a look at why I added that warning, starting with the SPX 24-hour chart (I'll explain its significance afterwards):

The key observation about this chart is the BREAK of the mini-crash low.  Yes, there is one potential bull pattern under which such a break would be expected -- but there are at least three potential bear patterns that opened up at that break:

1. a b-wave low (which I was indicating via Friday's parenthetical (quoted above))
2. a bear nest
3. an ending diagonal that still needs a new low

This means, all other things being equal, there are more ways for this to work out in favor of bears than there are for it to work out in favor of bulls -- at least over the near term and as of right this second.  I say that because if bulls can clear the red bear 2/B high, then they eliminate options 2 and 3 from that list.

Let's look at the SPX cash chart with EWT labels:

That chart explains itself, as does the red channel chart:

Finally, a more basic look at INDU:

On the chart above: Yes, RSI divergences can run on and on before meaning anything -- but they're not what bulls want to see, because while RSI divergences don't NECESSARILY mean the rally is over, neither do they offer any indication that it isn't.  So it's another weak warning flag for bulls.

In conclusion, yes, bulls could still recover the ATH directly, there are no slam dunks here for bears... but this is not an ideal position for bulls at the moment.  If bulls can clear the red 2/B high on the first chart, then the picture gets a little fuzzier again.  Trade safe.

SPX Update: Bulls Not Out of the Woods Yet (and we all know what lives in the woods...)

Lots of noise but not much else since last update.  Nonetheless, let's put on our Elliott hats and take a deeper look at what we seem to have so far:

Bigger picture, support is still holding -- but so is resistance:

Let's revisit the conclusion from Monday's update one more time, and then I'll add to it at the end:

[T]he bottom line is, from a technical Elliott wave perspective, nothing has happened yet and this could just be a particularly violent fourth wave.  Even from a standard TA perspective, this could just turn out to be an expected test of old long-term resistance (second chart) before the market moves higher again.  In other words:  While this could turn into something more significant, it's tempting but simply premature to assume that will happen just yet.  Let's first see how the market handles the levels that actually matter. 

That said, unless bulls can sustain a breakout over 6723, we do have to respect the three-wave nature of the rally and maybe give a slight edge to bears for the time being.  (Do note that there's also one bear pattern that breaks 6723 briefly before getting ugly, so even 6723 isn't a complete failsafe for bulls.)  Trade safe.

SPX Update: A Well-behaved Market

Since last update, SPX did exactly what it was supposed to (hence today's title) -- tested blue from below (as suggested), then dropped down to test red (as also suggested):

Bears need to keep the chart below in mind -- unless and until SPX whipsaws its very long-term breakout, this could just be a classic scary retest, which is pretty standard fare for these types of things:

Despite a bit of back and forth, nothing of note has occurred since last update, so I'm going to reprint that conclusion.  (Incidentally, when I said "fourth wave," I meant it's still possible this is just a fourth wave correction to a potentially-ongoing bull move.)

[T]he bottom line is, from a technical Elliott wave perspective, nothing has happened yet and this could just be a particularly violent fourth wave.  Even from a standard TA perspective, this could just turn out to be an expected test of old long-term resistance (second chart) before the market moves higher again.  In other words:  While this could turn into something more significant, it's tempting but simply premature to assume that will happen just yet.  Let's first see how the market handles the levels that actually matter. 

Trade safe.

SPX Update: A Touch of Grey

Last update ended with:

In conclusion, the first chart notes that the rally is finally showing some signs of... I don't want to say "exhaustion" just yet, but certainly some lethargy.  That said, there's no distinct pattern we can point at as a slam-dunk example of this, but we've seen a lot of overlap and little progress recently -- and that can sometimes be a warning sign.  So bulls should at least keep on their eyes open here. 

And that turned out to be understated but very much correct.  For the record, it's written as it is (with the ellipsis hanging as a marker of where I overrode my first instinct) because the word I originally wanted to use was in fact "exhaustion."  But I stopped myself because I couldn't justify that logically since there was nothing concrete in the chart that I could point at.  So it would have been "because I say so" (or "because I sense a disturbance in the Force"), which is kind of hard for even me to get behind.

Anyway, I regret not going with my first instinct, but at least I was able to provide an extremely timely, if understated, warning to bulls.

As to where we are now -- well, the market is into that lovely no-man's land between old, largely irrelevant (from an Elliott perspective) support and the actual meaningful support zone (black):

It is quite interesting that black support on the chart above roughly lines up with the next important very long term support zone (below):

So let's cut to the chase here:  In another market (meaning: a real, normal market), I'd probably think more downside.  In this market, though?  I prefer to wait to see what happens at the key levels before pushing out onto any limbs.  Because the bottom line is, from a technical Elliott wave perspective, nothing has happened yet and this could just be a particularly violent fourth wave.  Even from a standard TA perspective, this could just turn out to be an expected test of old long-term resistance (second chart) before the market moves higher again.  In other words:  While this could turn into something more significant, it's tempting but simply premature to assume that will happen just yet.  Let's first see how the market handles the levels that actually matter.  Trade safe.

SPX Update: A Bit of Lethargy

Last update was on target:

And of course the eternal channel is still active:

In conclusion, the first chart notes that the rally is finally showing some signs of... I don't want to say "exhaustion" just yet, but certainly some lethargy.  That said, there's no distinct pattern we can point at as a slam-dunk example of this, but we've seen a lot of overlap and little progress recently -- and that can sometimes be a warning sign.  So bulls should at least keep on their eyes open here.  Trade safe.

SPX and GOLD Updates

Last update provided a near-term trend line as potential support, and SPX never broke it, rallied up to a new all-time high, then reversed back through that line -- but the new all-time high negated the original near-term pattern that would have been applicable had it broken down directly.

Bigger picture, SPX is of course still in the channel.  It's been in some version of this channel basically forever.

Finally, it's a good time to update Gold, which I capitalize (I guess?) to differentiate it from the color (not really sure why I capitalize it, to be honest -- just doesn't look right in lower case).  Anyway, Gold is reaching the top of a sneaky bastage trend channel, so that's worth keeping an eye on:

Not much else to say beyond that for now.  Trade safe.