Market Update: Is Bearish the New Bullish?

The question everyone wants answered is:  Are we in a new bear market now?

The correct answer is that no one knows for sure.  All of us can speculate, though some folks tend to speculate more forcefully than others, sometimes pounding their fists on desks to drive home the point that their speculation is vastly superior to all others, and thus to be taken seriously.  But they're still speculating in the end.

The lingering question in my mind is whether this decline was a high degree fourth wave, or the start of a new bear.  The funny thing is, as long-time readers know, for most of 2015, I was anticpating that we were in a topping process.  Five and a half months ago, I published the following chart, and made the argument that the market was completing fifth waves at multiple degrees, and therefore far more likely to be topping than to be gearing up for a new bull leg, as many analysts were expecting. 

Of course, let history reflect that I was early in calling for a major correction... by 62.73 points on the Dow Jones Industrial Average, which is about one-third of one percent (.34%).

(And congratulations to the big name TV analysts who, over the past few weeks, started calling for a top.  Welcome aboard!  We've missed you for these past six months.) 

The two charts below were drawn up just before the crash, and published in our forums.  (And for the public record, on August 21, I described in the forum how I was seeing very real potential for an actual crash on the 24th.)

The chart below was drawn on the 21st, but I haven't published it publicly yet.  At the time, INDU was in the process of whipsawing its massive megaphone -- obviously, it has since happened.  This is one of the other things that makes me wonder if we're in a fourth wave, or something much more ominous.

Basically, a lot will depend on the coming sessions.  SPX shows why, in the simplest possible format:

Here it is in a more complex format:

Next, a short-term chart of INDU shows that the rally could be complete:

Finally, I was a very active trader in the 2000-2003 and 2007-2009 bear markets -- in my "first" bear (2000-2003), I got pretty burned buying puts at the wrong time.  So, the following chart is presented as something of a public service to any traders who may have limited experience in bear moves:

In conclusion, the question of whether we're in a bear market yet may be a moot point.  The real question is simply:  "Is there more decline still coming?"  At this juncture, we have a three-wave rally that could be counted as complete.  That makes the current resistance zone the first inflection point, and how the market reacts to this zone will be telling.  One aspect of the current market that seems characteristically different from the bull is the sloth which with the current rally has recovered from the lows.  Perhaps that will change in coming sessions.  It's been a volatile market, but the current rally hasn't left the characteristic V-bottom of recent bull market lows -- and perhaps that's a hint that the final lows aren't in yet.  Trade safe.

SPX, BKX, NDX: This Market Loves It Some Complex Corrections

Friday's update was a live, forum-only update, and anticipated SPX would make a high at either 2089 or 2092.  (Please note:  If you have recently applied to the forum, your account will be activated within the next 24-48 hours).  As of this morning, SPX has indeed reversed at 2092, and profits should be easy to protect or capture heading forward.

The overall pattern at this point is, quite frankly, an absolute nightmare to try and get an exact handle on, but nevertheless, I've tried to narrow down the options.  Let's start with NDX:

SPX is, so far, following the preferred path.  Whether it will continue to do so remains to be seen, of course, but starting off the day 10 points in the black is always a good thing.

The next chart shows the same count, but zoomed out a bit.  Do note that in the event that SPX cannot break 2078, more bullish options remain on the table.  Also note that we appear to be in an expanded flat, which wholly reserves the right to break 2078, then form a more complex (2)/B right back up to the high.  Not everything can be anticipated in advance...

Finally, I drew up this simple BKX chart back when the futures were still green on Sunday, primarily to help convince (or un-convince!) myself that shorting 2089 SPX was a smart move -- but I'll share it anyway, for educational purposes:

In conclusion, we're essentially still within the noise zone, which has lasted for the entire year, and it's getting harder and harder to interpret the near-term structure, due to the fact that there are simply too many options that remain technically valid.  So, boiling the preferred count down to its most basic common denominator, things are unchanged from the last few months:  The preferred intermediate count remains bearish.  It's primarily a question of exactly how we get there.

Note that the "best guess" is for near-term weakness, which is then bought back up north of Thursday's highs, as shown in the charts above.  Trade safe.

SPX Update: Potential of a Bearish Pattern Failure Looms

Since last update, the market turned at the second noted bear inflection zone, and this has cast a shadow on the "usual" expectation of the market reaching 2115.  It's possible that the pattern failed to generate the usual outcome, which can be a signal of an exceptionally weak market -- but due to the complexities of the noise zone, we can't entirely write off a trip to 2115 just yet.

We're just going to focus on the big picture chart today, which shows the potential of a bearish pattern failure (black "bear ii").  This pattern was expected to be run north of 2114, but stalled in last update's second noted "bear c of (2)" inflection zone. 

In conclusion, at the moment, there's very little to suggest that bulls are still running the show.  The preferred counts remain intermediate bearish, although there are options for complex corrections that give bulls a near-term edge.  Right now, though, the pattern is bearish until proven otherwise.  Trade safe.

SPX, INDU, NDX: No Suprises Today

Friday's update warned that it was time for bears to be cautious, and, indeed, it appears we'll have a significantly higher open this morning.

Keep in mind that we're still inside the Great Noise Zone of 2015, so there are a lot of near-term options inside this range.  The preferred option of the past few weeks probably has to continue to be given at least slight preference, and that's for a textbook "double retrace" that will now head back toward 2115 SPX:

Worth noting that the market reached a perfect 1.618 extension of the proposed wave A, which is often where a C-wave will bottom:

Keep in mind that if we are now currently in a C wave rally, as shown by the bull count on the first chart, then it will likely be fairly relentless for a while.  It's wise to wait until the target zone is reached, and/or we begin seeing impulsive declines before trying to go against it for more than a scalp.  And frankly, even scalping will be difficult against the trend on a C-wave.

This next chart is a bit ahead of the curve, and isn't relevant if we're in a second wave (as shown in the bear count).  But if we do indeed test/break the 2115 zone, then one option for an extremely complex pattern opens up -- as is shown below via INDU:

Finally, NDX also hints at the possibility of a C-wave rally.  The bear count here is the same: for a second wave, that could end roughly where shown by the label:

In conclusion, the intermediate picture remains bearish, but the near-term picture is a bit up for grabs at the moment.  If we get back to 2115+, then, the closer we get to the all-time-high, the more actionable it becomes (not trading advice!).  If we start to see impulsive declines from the bear 2 zone, then we might consider the possibility that the picture is even more bearish than shown.

Last update, I briefly covered the bull option, via INDU -- that option remains wholly viable, of course, so it's wise for bears to continue with a cautious approach; in the event that we reclaim the all-time high, then we'll have to give the bulls a bit more airtime.  Trade safe.

SPX and INDU: Time for Bear Caution

First off, I apologize for the brevity of the recent updates.  I promise a more detailed update this weekend.

Let's get right to the charts.  The last few days have been wonderfully-profitable for forum members, as I've been pointing out the turn zones on the board in real-time-- and (sorry to toot my own horn) have nailed most of the them quite accurately.

At this point, we're into a major inflection zone, since SPX has now completed the requirements for a double-retrace:

INDU is in a larger inflection zone:

The bear option for INDU is that we're in the process of forming a massive nest of bearish first and second waves.  Watch for sustained trade beneath long-term support for that option to become a significant potential.

In conclusion, we're at a major inflection zone for both the near-term, and the intermediate-term, as outlined on the charts.  Trade safe.

SPX and INDU: Market Reaches Inflection Point

On July 31, I published the following projection chart for INDU:

Here's how INDU's chart looks now, with the actual price action:

SPX below.  The bull count is a complete ABC decline (blue abc).  Below the 3/c level, and we're probably looking in the vicinity of black C as next potential support.

In conclusion, this is an important inflection point.  So far, INDU has tracked perfectly, which always makes me at least a little nervous.  The next session or two should be revealing.  Trade safe.

SPX and INDU: Ingredients in Place, Can Bears Make It Happen?

Last update projected an opening pop to a marginal new high in INDU that would be sold, and that's exactly what we got.  In a perfect world, to keep things simple, bears would like to see Friday's highs hold in INDU and SPX.  Another marginal new high would be okay, but the near-term bear counts would be cast into shadow if this were to occur.

We'll start with INDU:

INDU's hourly chart:

Below is a super-simple chart of SPX:

And finally, the SPX 1-minute chart does support the bear case:

In conclusion, while we can't be certain that a reversal began on Friday, bears do have all the correct ingredients in place.  There's not much else to be said.  Trade safe.