SPX, INDU, BKX, NDX: Upside Turn Targets Captured; Market Turns

Friday saw the upside targets from January 30 captured across the board, as SPX broke above 2064, and INDU broke above 17922.  While there are times that Elliott Wave dictates a "watch and wait" approach, there are often multiple occasions during each year in which the market tips its hand just enough for us to see what's coming next.  We can see on the first chart below, which was originally published on January 30, that the market has followed the path exactly as projected (to red C/blue (2)). 

Thus, the preferred count netted more than 120 points of closed profit in only the past 6 trading days.  And, for those who reversed short at the highs, the preferred count has an additional 9 points of open profit as of Friday's close.  Of course, it remains to be seen if the wave will continue to follow this exact path, or if the market will open up new potentials -- but either way, the last two months have been very solid for the preferred near-term wave counts.

The funny thing is, there's currently no material difference between the January 30 projection chart (below) and the market's actual performance, right down to both the turns, and the dates where the turns are shown.  I almost feel like I don't even need to update it with the actual price action (!).  This actually makes me a little nervous, because I figure that, eventually, the market is due to throw a curve-ball into the mix.

(Generally speaking, I don't do time projections; so please don't expect the dates to always line up this well.)

Friday's update suggested that the market still needed a final thrust up in wave (5) of C, but that the rally had a good chance of coming to an end during that same session.  So far, everything has played out as anticipated, and Friday's decline appears to be impulsive, suggesting there is more downside still in store:

No change to INDU's chart since January 30, and, as noted, the 17922+ upside target was captured:

Next is INDU's near-term chart below:  (continued, next page)

SPX, INDU, RUT: Perchance the Rally Ends Today...

There's been no change to the outlook for some time, so let's get right to the charts.  The rally has finally come within a few points of the upside target zone.  There should be a bit more upside remaining, but this is an interesting inflection point, and there is a chance that the rally ends today.

Same potential on INDU:

INDU's daily chart, for context:

SPX two hour chart:

Finally, RUT does present an interesting possibility:

In conclusion, the "bear count" has netted roughly 80 points of UPSIDE profit in SPX over the past few sessions, so being a bullish bear hasn't been such a bad deal lately.  From an intermediate perspective, the bear counts remain preferred, but we'll begin to discuss bull options in more detail if that becomes appropriate.  The first step for bulls would be to reclaim the all-time high.  Trade safe.

SPX and INDU Updates: No Surprises So Far...

In the last two updates, the preferred count expected new lows south of 1988 SPX, followed by a strong rally, which is exactly what we've gotten since then.  There is thus no material change to the outlook, though in the interest of prudence, I've noted the current inflection zone on the charts.

Let's start with SPX:

Next, let's take a closer look at the wave count which could underpin the current inflection zone.  We'll start with INDU, because I've detailed that count more specifically on that chart.  The count in black is considered the alternate count for now:

The alternate count on the SPX chart is essentially the same as INDU, so is painted only in broad strokes on the SPX chart:

Here's a bigger-picture view of INDU via the daily chart.  INDU and SPX are largely expected to move in a very similar, though not necessarily exact, fashion.

Finally, INDU's 5-minute chart below:

 

In conclusion, there's no material change to the outlook since last week, and it is currently still anticipated that this is a corrective rally, which will ultimately end with new lows for the intermediate term.  Nevertheless, I would be remiss to not at least mention that, with the recent new lows, the bulls have finally opened up at least the potential now for new highs over the intermediate term.  That bull count is being viewed as a heavy underdog right now, because, presently, the best fit for the charts is still that this rally is a correction to a new downtrend.  Thus we'll cover the bull count in more detail only if it becomes appropriate to do so.

It's worth noting that the current rally fits as a c-wave, since c-waves function as the great imposter.  The job of a c-wave is to convince everyone that the trend has changed -- so the purpose of this rally is to convince everyone that the "correction" is over, that the market has sounded the all-clear, and to make as many people bullish again as it possibly can.  Trade safe.

SPX and INDU Updates

Last update expected lower prices over the near term, and the market obliged.  There were two near-term wave counts shown for INDU, and INDU closed right on Friday's target for the more conservative of the two counts, at the blue (B)/2 label.  This is the moment of truth, and if INDU sustains a breakdown at 17136, then we'll have confirmation of at least a fifth wave decline underway. 

Building the next larger wave degree from the current near-term pattern, if INDU breaks 17136 immediately, then we can probably expect a test or breach of the 200 DMA:

An additional INDU one-minute chart contains some further discussion on the pattern:

No change to the SPX counts:

And a more basic support/resistance chart on SPX:

In conclusion, on an intermediate basis, there's no change from Friday's update (or the updates of the past few months, for that matter).  Basis near-term, a breakdown here would need to be respected as holding at least considerable bearish potential energy, and I would not look for an immediate bottom in that event, but expect at least some degree of follow-through.

On a near-term basis, on Friday, the market was expected to decline to test the recent lows at the minimum, and that's what happened -- so now we've hit the first inflection point, and there's simply not much more to be done in the way of analysis until the market declares its next intention.   Trade safe.

SPX and INDU: Two Challenging Calls, but the Context Remains Bearish

I'm going to keep today's update as simple as I possibly can, given the complex options.

There are two questions begged of the charts, and both are quite challenging to answer right now.  Keep in mind that SPX is now on its ninth trip through the exact same price territory that it has been covering since November, and each trip through a zone weakens support and resistance inside that zone -- thus, making predictions while a market is still within a noise zone becomes increasingly difficult.

That said, let's tackle the challenge as best we can.

The near-term question is: is this leg of the decline complete?  I'm very slightly favoring the idea that it is not yet complete, meaning new lows are lurking on the near-term horizon -- at least for SPX, if not INDU.  Due to the fact that the decline may have included one or more extended fifth waves, this is a challenging call.

The bigger question:  Has wave (3) down begun, or is the recent decline from 2064 SPX still part of an ongoing correction?  I'm slightly favoring the idea that it is part of an ongoing corrective wave, and will launch back up to retest 2064 yet again.  I'm favoring that because the last rally to 2064 appeared to be three waves, and ended abruptly without a fifth wave.  That suggests it was wave (b) of a more complex expanded flat, as shown below:

 
Here's what I think I know:  this market remains intermediate bearish; the only question is how we get there.  This chart remains materially unchanged since November 17, and the market still seems to be following the projections that were outlined more than two months ago.

Let's look at the first two questions in more detail, via INDU.  Daily:

5-minute chart:

One-minute chart:

In conclusion, SPX would look slightly better with a new low beneath 1989, INDU is a near-term toss-up regarding a new low.  In the meantime, if either market can sustain trade north of its down-trending channel, we may have to consider the idea that the lows could be in.

At the next larger wave degree:  Due to the fact that the rally to 2064 in SPX appeared to be 3-waves, when it "should" have been five-waves, I'm inclined to slightly favor the idea that 2064 will be tested yet again -- but this is again a very difficult call.  Presently, I believe that any rally would present yet another excellent shorting opportunity, if it were to occur.

In all cases, the preferred intermediate count presently remains bearish, regardless of the exact path we take to get there.  Trade safe.

SPX Update: Detailing the Options on Fed Day

The current charts have left open multiple options in order to maximize frustration and confusion on a Fed day.

I can't tell exactly what the market's going to do next, but I have managed to put together some clear patterns to watch.

Let's start off with a couple key points:

INDU failed to reclaim 17923.  It "should" have reclaimed that level for the expanded flat, however it is possible that the pattern was a running flat, which is something I discussed on January 20:

It's worth noting that bears and bulls alike should stay alert to the possibility of a running flat, which would see wave (2)/B stall just short of the blue b-wave high.  The odds go to the expanded flat based on percentages, and because the market likes to fool the majority, but a running flat is always possible and simply cannot be predicted or ruled out.  Thus, as (and if) we approach 17,850+, stay very alert if there are any signs of an early turn. 

INDU dropped like a rock yesterday, which felt a little odd, given how well the supposedly high-beta indices like RUT held up (RUT closed just off its recent highs).  These are fractured markets, so we have to give real consideration to the possibility that INDU formed a running flat.  

This brings me to the second key point:  The rally into the recent highs in INDU and the 2064 high in SPX appears to be three waves.  Honestly, it's one of the ugliest waves I've seen in this market in a long time, so it's possible that it's a bizarre five wave rally, and that wave (3) down has begun.  But it does open up a couple possibilities, which we'll discuss momentarily.

Let's start off with the intermediate view, which remains unchanged since November.

The question now is whether the larger decline wave has already begun, but that's not entirely clear yet.  As noted, the recent rally in INDU/SPX appears to be three waves.  That leaves open the possibility that it was wave (i) of an ending diagonal, as discussed last update.  In fact, SPX dropped right into where I had drawn blue (ii):

Currently, we have a three-wave decline, which would still fit the bill for an ending diagonal, but that becomes a bit more iffy below 2019:

If 2019 fails, then we'll have an impulsive decline, and that would open up two options, as detailed on the chart below:

Next is a chart of INDU that I published in our forums after the close on Monday:

Finally, the ratio chart of HYG/TLT was one we began watching much more carefully back in March of 2014, when I called the top in that ratio.  This remains a foreboding chart for equities.

In conclusion, the first step for bears appears to be sustained trade south of 2019, as that would create an impulsive decline.  That would largely (not entirely, but largely) eliminate the ending diagonal.  That would then leave the two options shown on the fourth chart:  either wave (3) down is already underway, or the expanded flat is becoming even more complex.  Due to the apparent three-wave rally into 2064, we would have to at least consider that second option.  Trade safe. 

SPX and INDU Updates

Thus far, there's been no material change from the past few updates, though it's interesting that my "best guess" near-term path for the Dow Jones Industrial Average (INDU) played out exactly as projected.  The song remains the same, though I'd like to see bullishness increase a bit over the coming sessions.  Ideally, we should peak shy of the all-time high at a point when most bulls are feeling invincible.

If we instead break the all-time high, then, of course, we'll need to consider more bullish options -- however, due to the pattern off the low, the first alternate count would remain intermediate bearish.  But we'll burn that bridge if we come to it.

Let's start off with the big-picture SPX chart, which has continued to follow the road map that was first outlined back in mid-November:

Next is a more basic classic TA chart of SPX:

INDU followed Friday's proposed path for a fourth wave correction almost perfectly.  Ideally, we'd still like to see INDU break the red (b) wave high, but there are some inflection points that INDU will need to clear first (see chart notes). 

The SPX 1-minute chart below.  Presently, this is still presumed to be a fourth wave, but note INDU's inflection zone above -- SPX may face a similar challenge at the 2060 +/- zone.

Finally, I gave some thought this weekend to what the market could do to cause the greatest level of confusion at this juncture, and in the event Friday's decline continues directly, then we should give some consideration to the possibility that wave C is unfolding as an ending diagonal.  The upper and lower trend lines are purely speculative at this point, and they could deviate substantially from the way they're currently drawn.  I think of the market as a chess opponent, so I try to think two steps ahead -- but right now, this is just something to keep in mind.

In conclusion, the intermediate outlook remains unchanged, and new lows are still expected.   In the meantime, we have clues and levels to watch for the near-term, which should help us nail down exactly how we get there.

Keep in mind that, as noted on Friday, SPX already completed the minimum expectations for the pattern, so new highs beyond 2064 are not required.  However, due to INDU, the option that ALL OF 2/B is complete has to continue to be viewed as at least a slight underdog, and the diagonal would be first alternate.  Ultimately, though, we are awaiting a third wave decline, so it reserves the right to begin unexpectedly.   Trade safe.