SPX and COMPQ Capture First Intermediate Targets -- What Next?

A few interesting things have happened since Monday's update:

1.  SPX captured its first intermediate target zone (1885-1891).

2.  COMPQ captured its first intermediate target zone (4200 +/-)

3.  The near-term bullish (still intermediate bearish) B-wave option is effectively off the table.

Before going further, I'd also like to refer back to a couple important paragraphs from Monday's update, because these remain important with the market in its current position:

As I wrote a couple weeks ago, though, do keep in mind that "there's no such thing as support in a bear market" (see 9/24 annotation) -- so if the market has entered a bear phase, then support zones will mean much less than they did during the bull phase, and will end up functioning primarily as bull traps.

The 2-hour chart notes that, here again, this market has reached a potential support zone.  This is tricky here for bulls, though, because third waves are very unforgiving to counter-trend trading.  If the market has already entered blue (3)/C, then every bounce along the way is going to be sold to new lows and there will be no second chances to exit longs for profit.  So unless one wishes to end up becoming a "long-term buy-and-hold investor" at SPX 1900ish, I would suggest staying very nimble with any long positions.  The trend is down at the moment, thus the lion's share of intermediate profits will likely come from selling the bounces, not buying the dips.

Beyond that, I'm going to keep things fairly simple for today's update.

We'll start with COMPQ -- but before looking at the current chart, let's take a quick look at the COMPQ chart I drew on September 29.  From time-to-time I post things like this, because I've occasionally heard people grumble that Elliott Wave is a bunch of malarkey and there's no way it can work and besides, the market's unpredictable, and you can't pick tops or bottoms or time the market, and blahblahblah blah.  Plus:  blah!

So, in response, here was the only Elliott Wave count I posted for COMPQ, complete with projections, all the way back on August 29.  If anyone wants to insist this was pure random dumb blind luck, and that Elliott Wave doesn't work (especially considering that the wave counts were not bearish in the months heading into the top; even the first line on the chart goes up to V), then my only reply is this:  Get your own column.

Below is the current COMPQ chart.  As noted, the B-wave was slightly time-compressed verses how I drew it above, yet it peaked in the expected price zone.  For reference, I rarely do time projections -- I generally just do price, and then try to utilize the chart space so that the projections are easy to follow.

At this point, we do have to stick an "alt: C" on there, in honor of the fact that COMPQ has reached its A=C target zone -- but currently, there's nothing to indicate the bottom of C has arrived, and the preferred count remains pointed toward 4090-4110, with potential for even lower prices.  

SPX's 2-hour chart is below.  SPX has dropped through the gray base channel as anticipated, and has remained within the blue crash channel.  Bears shouldn't really consider anything other than sticking to "short and hold" mode as long as that blue channel remains intact.  This is what they've been waiting for, after all.

I drew the 2-minute chart yesterday, when future were still trading roughly flat, and thus I discussed an alternate near-term count.  As of the time of publication, that count is looking like it's become an even "less than alternate" count, and assuming the futures decline sticks through the open, the black alternate ABC count may be able to be ruled out within seconds of the cash open.

The preferred near-term count is that the market has been coiling, and is about to finally see the breakaway-type decline that has been conspicuously absent to this point.

NOTE:  Typo -- 1940-51 should be 1840-51.

In conclusion, the intermediate preferred count remains bearish, as it has since September 24, and the near-term preferred count is presently bearish.  Bears have no reason for any anxiety whatsoever as long as SPX remains within its crash channel.  Trade safe.

SPX, INDU, TRAN: Market Reaches Near-term Inflection Point; but Intermediate-term Unchanged

Nothing has changed to the intermediate picture in the past few weeks, and that remains bearish.  But the near-term is still up for grabs, so in this update I'll try to cover a few signals to watch.

Let's start with INDU's "simple" chart from a few weeks ago.  On Friday, INDU captured my target from October 29, and has accordingly reached a potential support zone.  As I wrote a couple weeks ago, though, do keep in mind that "there's no such thing as support in a bear market" (see 9/24 annotation) -- so if the market has entered a bear phase, then support zones will mean much less than they did during the bull phase, and will end up functioning primarily as bull traps.

The 5-minute INDU chart shows that both near-term options discussed on Friday still remain viable, and there's been nothing conclusive yet to rule out one or the other.  Spectacular failure of the lower blue channel line would be the bearish expectation, while the near-term bull option would need to muster a bounce very quickly to remain on the table.

On the SPX 30-minute chart, the very first step for bulls to even begin to gain a little traction would be to break out of the blue waterfall channel:

The 2-hour chart notes that, here again, this market has reached a potential support zone.  This is tricky here for bulls, though, because third waves are very unforgiving to counter-trend trading.  If the market has already entered blue (3)/C, then every bounce along the way is going to be sold to new lows and there will be no second chances to exit longs for profit.  So unless one wishes to end up becoming a "long-term buy-and-hold investor" at SPX 1900ish, I would suggest staying very nimble with any long positions.  The trend is down at the moment, thus the lion's share of intermediate profits will likely come from selling the bounces, not buying the dips.

Finally, TRAN is another market that's reached potential support:

In conclusion, this is a key inflection point for the near-term, though I do not believe it's an intermediate inflection point.  Nothing has changed in my intermediate stance since September 24, and I still believe bears have the ball for the intermediate-term either way -- but bulls do still have a shot at mustering a near-term rally, and it has the potential to be a solid rally.  Whether they will or not is another question entirely. 

It's interesting how the wave counts have set up here, in that if support fails significantly, that will essentially confirm that we're in the middle of a third wave decline... and the middle of third waves is the "point of recognition" for the masses.  What better catalyst for recognition could there be than a spectacular failure of support?

The main question in my mind is still simply "now or later?"

So, near-term, we have a few clues to watch to help sort out short-term bull option from the bearish option.  Intermediate term, I believe that even if bulls can put together a rally from here, that rally will be sold to new lows.  Trade safe.

SPX, INDU, NYA: Bulls Take a Beating

A lot of folks thought I was nuts back on October 6, when I said that the decline from the all-time high appeared impulsive to my eye, and that I felt that bullish calls for new highs were premature.  But I doubt I'm in the minority any more.

On October 6, I also outlined that my "best guess" was for the market to retest the low, then rally strongly in a double-retrace.  It did just that, but the subsequent rally failed to break the 1977 high, which would have been the typical expectation of the pattern.  If 1970 holds, then I think our best bet is to view that as a somewhat-rare running flat, wherein the c-wave fails to exceed the a-wave high (in this case, 1977).

Yesterday had all the hallmarks of the start of a third wave decline, since the majority were caught looking up while the market dropped relentlessly.  However, perhaps counter-intuitively, there is still an option for a rally back to that zone north of 1977.

In a normal market, I would just say that the third wave has started and be done with it.  But in this market, I am staying extremely alert to the rally option.  This is the type of pattern you really can't call in advance; it's enough to stay aware of it in order to make any necessary adjustments in real-time.

Below is the SPX 30-minute chart, which discusses this option in more detail:

The above-noted near-term bull potential would be very frustrating for bears who are already short and who don't remain nimble, but would be a blessing for bears who are looking for an opportunity to get short.

The SPX 2-hour chart ignores the above-option for purposes of keeping the chart clean, and notes the intermediate targets.  The intermediate count will most likely remain bearish in the event of the more complex flat and near-term rally discussed above.

INDU's chart also discusses the near-term bull count, which at the present price point is still about a 50/50 shot, and notes (in passing) the lone remaining intermediate bull count.  While I'm alert to the near-term bull option, I am currently discounting the intermediate bull count heavily enough that I'm not going to discuss it in any detail unless it becomes appropriate to do so.

NYA was one of the markets that kept me in the bear camp when many were turning bullish, and there were no surprises at all here over the past week:

In conclusion, I cannot confirm or deny the near-term bull option until the pattern develops a bit further, but I wanted to call it to readers' attention, because it's definitely something to remain aware of.   Regardless of how the near-term plays, I still remain intermediate bearish until further notice.  Trade safe.

SPX Update: Short and Simple

I apologize, but I ran short on time today, and, accordingly, have to do a relatively short update.

The simplest thing to do is reprint my "best guess" call from Monday:

If I had to "pick a side, any side," I would probably lean ever-so-slightly toward the extended fifth impulsive decline, but that's just because I'm a rebel.  Well, that -- plus that's what the pattern looks like to me.  And I think that pattern would burn a lot of people.

Just for grins, if this were an extended fifth, it would mean a corrective rally underway now -- one that could stretch out for a spell, with a possible "double-retrace" in store at some point.  That would see the market continue to rally for the near-term, then decline toward the recent low, but that test of the low would hold and we'd then rally back up to break that first high.

Hopefully the above at least kept readers from getting too bullish near the highs, as it seems many other traders did.

Step 1 and 2 of the suggested pattern have played out, and the market is now into the zone that qualifies as a retest of the low.  Basically, bulls need to hold it in the general vicinity of the 1926 low to have a near-term shot at another leg up.  They do not need to hold the exact low, because a brief break of the low would not rule out a b-wave (shown in red below).  But any break of the low would imply a third wave decline is in the cards, either immediately upon the break, or after a more prolonged rally to complete the "double retrace" (ideally toward the red 2 on the chart below).

The challenge on the chart below is that both the rally off the low, and the decline from the recent high, appear to be impulsive.  This makes it almost an impossible call as to whether we'll see another leg up or not.

 
In conclusion, my inclination remains that the decline from the all-time-high to 1926 SPX was impulsive (first waves are often sloppy and difficult to count, and that wave fits the bill), which means the rally is a correction to the decline.

It's worth noting that bears have pushed a few indices, such as RUT, to new lows -- and (although, obviously, one can never be 100% certain of the market's future) this was one of the points I tried to call attention to on Monday when I discussed the disconnect between large-caps and the broader market, which seemed to be showing more weakness than SPX and INDU.

The market is now roughly where I suspected it would be when I penned Monday's update, so at this point it's a simple matter of watching to see whether this test of the lows is successful or not.  Trade safe.

SPX, INDU, NYA: Bullish, Bearish, or Neutral?

Last update, I warned that the market had reached an inflection point, and that it was likely to rally over the near-term, but that the intermediate picture was a bit hazy.  Has the intermediate picture clarified since then?  Let's find out.

People hate uncertainty.  Some traders feel uncomfortable with the concept of neutrality, and would rather just "pick a side, any side!"  Some folks would even rather be wrong in the end, just as long as they can feel like they're being decisive in the moment.  And I think that's a fine approach for things such as choosing what you want when you're in line ahead of me at Starbucks (seriously, hurry up already!  Yes, Venti is the large size, for crying out loud; I thought everyone figured this out years ago.).

But, personally, when it comes to money, I would rather be right than be arbitrarily decisive.  And as I've said many times before:  Cash is a position, too.

I'm going to refer back to something I wrote on Friday:

I've been pretty openly bearish on the market since September 24 (See: "As Good as It Gets" for Bears), and SPX has since performed in line with expectations, and captured (and slightly exceeded) my downside targets.  But we have to recognize the market has now reached an inflection point.

This is where it's always tempting to overstep our bounds as traders and analysts.  There are certain patterns the market forms which are predictive -- for example, predictive patterns are what caused me to think a top might occur near SPX 2018-28, and caused me to think we'd decline to at least 1935-42.  But now the predictions have come to pass, and we've moved from a predictive market to an inflection point.  The reality is, with the market is its current position, no one on the planet can say with certainty what form will develop in the intermediate wave structure from here.  Not just yet, anyway.

So surely we're there now after one whole session, right?  Well... hmm... Let's take a look at the evidence.

We'll start with a simple weekly chart of SPX:

So, as seen above, large-caps have a potentially bullish candle on the weekly chart.  But when we look at the broad market, via the NYSE Composite Index (NYA), the picture isn't quite as inspiring.  Note NYA took out its last swing low, as opposed to making a (thus far) higher-low like SPX.

Thus we have a bit of a disconnect between various markets at the moment.  Let's look at the near-term charts, and see if that will help clarify things.

The chart below is a great example of what I call a "Rorschach chart" -- bulls will see bull patterns, bears will see bear patterns, Cookie Monster will see patterns that look like cookies, etc.

Some of that goes back to my discussion on people wanting to feel like they're being decisive.  The reality is, this pattern just isn't clear-cut -- but it would certainly feel more comfortable to pretend it was.  If I had to "pick a side, any side," I would probably lean ever-so-slightly toward the extended fifth impulsive decline, but that's just because I'm a rebel.  Well, that -- plus that's what the pattern looks like to me.  And I think that pattern would burn a lot of people.

Just for grins, if this were an extended fifth, it would mean a corrective rally underway now -- one that could stretch out for a spell, with a possible "double-retrace" in store at some point.  That would see the market continue to rally for the near-term, then decline toward the recent low, but that test of the low would hold and we'd then rally back up to break that first high.  A prolonged corrective rally with a higher low/higher high should also be sufficient to burn off some of the excess bearish sentiment.

But, again, I'm not entirely sold on that outcome.  I can see the bull case quite clearly for an ABC decline -- and we've been in a bull market for the past few years, so until that changes, the simple reality is that bears have to consider themselves the underdog in any market battle.

In COMPQ, we find a similar pattern.  COMPQ has nearly reached Friday's upside target.  Once that target is captured (assuming it is), then I will have no further strong opinion at this exact moment.  That may change by Wednesday's update, as the market will reveal more information in the continuing wave structure.

In conclusion, I think the near-term edge probably has to go to the bulls for now.

Intermediate term, I think the picture remains a bit fuzzy.  And I'm content with that.  We were on the right side of the decline from the beginning -- and this move captured its downside target, plus a few points for good measure.  Thursday's impulsive rally then warned that profits should be protected on any remaining shorts, and got us looking up instead of down.  It's okay not to know what the market will do every second of every day -- we just need to have a good idea often enough to make money; and then be able to adjust to changing conditions as necessary.  Trade safe.

SPX, INDU, COMPQ: Market Reaches Inflection Point

I've been pretty openly bearish on the market since September 24 (See: "As Good as It Gets" for Bears), and SPX has since performed in line with expectations, and captured (and slightly exceeded) my downside targets.  But we have to recognize the market has now reached an inflection point.

This is where it's always tempting to overstep our bounds as traders and analysts.  There are certain patterns the market forms which are predictive -- for example, predictive patterns are what caused me to think a top might occur near SPX 2018-28, and caused me to think we'd decline to at least 1935-42.  But now the predictions have come to pass, and we've moved from a predictive market to an inflection point.  The reality is, with the market is its current position, no one on the planet can say with certainty what form will develop in the intermediate wave structure from here.  Not just yet, anyway.

Let's start with INDU for illustration.  I've put (4) and (5) in gray because they are unknown variables in the equation at the moment.  If INDU wants to form an impulsive decline, then it needs a fourth and fifth wave.  But we simply don't know if it wants to form an impulsive decline.  If it wanted to simply form an ABC, then it counts as potentially complete.

The rally off yesterday's low was clearly impulsive, and I mentioned this to everyone in the forums before the close yesterday.  Outside of expanded flats, impulse waves do not occur in isolation -- so while this chart doesn't give us conclusive intermediate answers right now, it does suggest further upside in store over at least the near-term.

 
SPX has so far found support near the long-term uptrend line:

Let's take a look at NYA, which also suggests a near-term rally.

The one-minute chart for NYA shows a pretty clear extended fifth wave, and that suggests the market may form a complex double-retrace correction.  Though I did not detail that on the chart, keep that potential in mind for now:

COMPQ also highlights the importance of the current inflection point.

In conclusion, the market has progressed from intermediate predictable into "intermediate guesswork" territory.  Near-term, a rally is expected, due to the impulse wave off the low.  If that rally forms an ABC, then we'll know with higher probability whether to expect new lows.  If it becomes impulsive, we'll know to expect the rally to continue higher for at least one more leg.  Trade safe.

SPX, INDU: Ignoring the Bulls

I have to admit, after the long chop zone we recently endured, it's been a while since I enjoyed charting this market.  But I enjoyed charting it last night.  I think the charts are pointing to some high-probability options right now.

Let's start with the SPX 3-minute chart, because I think this points to two reasonably clear near-term possibilities, and this will provide perspective on the charts which follow.

The 15-minute chart provides some additional perspective.  To me, Monday's break of 1965 says that the odds are very good that this decline isn't over.

 

Next is the SPX 30-minute chart.  For now, targets here are unchanged, due to the expanded flat possibility noted above.  If the market begins to confirm the nested third wave as currently labeled, then targets will need to be adjusted lower.

 

Let's take another look at the expanded flat potential for a continued chop zone, via INDU.  We can't yet ignore the possibility that the market will chop around further in this price zone, as it has on more than one occasion already.  The upside for bears in the event of continued chop would be that it would form a more solid topping pattern.  The downside would be "much patience required" in the meantime. Sustained trade below SPX 1967 would make an immediate decline more probable. (continued, next page)