SPX, COMPQ, NYA: A Bigger-Picture View

On Friday, SPX captured the "textbook" target of 2071, first published two weeks ago.  This came on the back of the preferred count's prediction (from September 21) that SPX would reverse from 1865-1880 and run up to the 2040 zone.  All in all, it's been a pretty solid month for the preferred near-term count.

Here's where I would caution readers:  Sometimes I can interpret one portion of a fractal pretty clearly, but then have to try and "puzzle piece" that portion into the larger fractal, which may not be as clear.  The last six weeks or so have been an excellent example where the fractal at one wave degree seemed fairly clear to me, but the larger wave degree seems a bit less clear.  It's tempting as an analyst to take a strong stance and pretend you know what the market will do at all times, but the reality is, nobody knows that.  In other words, please don't assume that simply because the last 300 or so SPX points have followed the preferred count's path that the big picture is "in the bag," as they say in the bagging industry (or wherever people say that).  The big picture fractal is decidedly less clear than the near-term fractals have been (kind of funny to call 300 SPX points heading both directions "near-term," but I'm not sure what else to call it).

Let's start with an interesting big picture chart.  This is a chart I hadn't updated since 2013, and I stumbled across it this weekend in an old chart-book.  What's interesting is the very-long-term trend line, shown in blue, which runs all the way back to 1974.  That's 1974 as in the year John Denver's Annie's Song was at the top of the charts.  You know the song, it's about population explosion (lyrics: "You filled out my census, like a knight at a florist...")

Over the past few weeks, I've been looking for earnings plays, and that involves scanning charts of individual issues that I wouldn't normally look at (obscure companies with names like "Jumping Turtle Consulting Management and Motorcycle Repair, Inc., LLC, Co." (symbol: *$&#??)).  While doing this, I've really noticed that stocks were sold indiscriminately during the crash, but there's been a focus on perceived quality as money has come back into the market. That's why the blue chips are outperforming, while a fair number of more speculative issues are still near or below their crash lows.

This is pretty self-evident when one looks at a chart comparing the broad-market-based NYA vs. SPX:

A long term chart of SPX provides some additional perspective:

Finally, a quick look at the 30 minute chart, updated only with Friday's price action.  What's interesting on this chart is SPX's break above the black trend line.  Bears need that to whipsaw -- although a whipsaw won't guarantee downside follow through, if that trend line acts as support, it would be decidedly bullish.  Note Friday did a little test of that line, and bounced, but there's too little action since the break to be informative:

In conclusion, the market is in an intermediate inflection zone, and the next few sessions have the potential to make-or-break the bear case.  Trade safe.

SPX, INDU, BKX: New Bull Leg, or Complex Flat?

Let's begin by reviewing some of the updates from this month, with some additional commentary.  First up is October 16:

Bigger picture, let's not get too focused on the (c)-wave count as the "only" count. There are definitely bull options for this to be a third wave, so there's no need to sell every new high. The worst disease for bears to get right now is "Fear of Missing the Top," because this leads to emotional trading and bad decisions. Tops are usually pretty clear. Worst case, you get something like the Fed Spike we had last month and an abrupt reversal. So what. That move made the market's intentions obvious immediately -- and there was still plenty of money to be made following the preferred count into its target zone of 1865-80 SPX.

As noted previously, even a bearish c-wave could extend as high as 2071 (and a bull wave would make new all-time highs), so without an impulsive decline (and a corresponding top) to act against, front running a wave like this can be hazardous to one's account, especially since there are no clear stop levels.


I haven't been front-running this wave; I've been waiting for an impulsive decline to act against.  I haven't been trying to "predict the top." I've been letting the market lead, and I trust it will tell me when it's time to flip short.  I learned this approach the hard way, as I imagine many bears are learning it now.  For what it's worth:  The upside for bears is that often we don't learn except from our mistakes -- when we win, we don't really think too hard about what we could have done better, and no growth takes place.  But when we lose, we truly challenge ourselves to grow and improve.

Back to the updates:  Do we want "long-dated predictions with conviction" during an unpredictable wave? Or do we want to protect our accounts and/or make money? My goal -- especially during a wave like this one -- is the latter. The position of this wave is ambiguous in the big picture, and there are at least 3 wholly viable big picture options here. Because of this, I've been watching the ST waves to determine if the pattern looked like a top -- and I simply haven't seen one yet. That has led me to consistently lean toward the idea that we were still headed higher, and I believe I've conveyed that:

10/9: "In conclusion, there are several upside inflection points for the bear count -- but bears should keep in mind that we've never been able to rule out the possibility that Wave IV completed at the crash low. The preferred near term count has had us looking up since SPX reached the target of 1865-80, so it's not as if we've missed out because we were "too bearish," as many others were -- it's simply a good idea to let the market lead now, and wait for clear signals."

10/12: "We're into a zone where we should probably at least begin watching for topping action, though one formula suggests this wave could run as high at 2071 +/- before experiencing any correction more significant than the one we saw on October 2 -- so Friday's warning to "let the market lead" remains in effect, at least until such time as it leads us to a more clear suggestion of a correction."

10/14: "In conclusion, we can't rule out an immediately bearish wave -- i.e., we can't rule out the idea that ALL OF (c) is complete. However, that presently appears to be at least a slight underdog to the idea that (c) (or "3" for the bulls) is still unfolding. If bears begin claiming levels that should be acting as support, then we may have to give bears more credit."

10/16: "The last signal was to buy support, and there's nothing to reverse that signal yet."

10/19: "It's quite possible there's more room for the rally to run, and my instinct is that it probably will run at least a bit farther, possibly after a correction."

10/21: "There's just nothing to add based on the recent action, except to note that the longer SPX hangs around the current price zone, the higher the odds that the current wave extends. As I've noted on several occasions, the "textbook" target for the current wave is 2071 +/-." and: "Bears should remain cautious if SPX can sustain trade north of the blue dashed resistance line."


As I wrote the other day (in our forums): Maybe I'll miss the top by a few points. Heck, maybe we'll open down 57 points tomorrow, and the perfect entries will all be gone. I'm okay with that. All I want is an impulsive decline that fits as an A or 1 wave as a level to act AGAINST, so I'm not shorting blindly into a freight train rally in a market that has left its options open.

Believe me, if I start to see something that says "short this pig NOW!" you guys will be the first to know.

So, where are we now?  Well, although bulls will likely feel pretty good about today, the market is still keeping its intermediate options open.  Let's start by looking at the complex flat I posted a few days ago.  This count has taken the lead for the available bear counts; while the bull count remains that Primary IV bottomed at the crash low:

One index to keep an eye on here is BKX.  BKX may help determine if SPX, et al, are going to continue their respective rallies immediately:

Finally, the 30-minute SPX chart.  If the current rally in futures sticks, SPX will exceed the 2071 target that I began talking about back on October 12.  One potential new target is discussed, but extended fifth waves can be notoriously difficult, so we'll see how it plays:

Finally, a late addition:  a simple, but interesting back-test is underway:

In conclusion, we caught the exact bottom of this wave, and the near-term wave patterns have kept us on the right side of the trade for the entire rally.  We're getting into a zone where the all-time high is at least close enough to function as a level to take action against, but that, of course, does not in itself guarantee that the rally will end.  Trade safe.

SPX Update: Short and Sweet

Since last update, the market has ground its way sideways/up, reaching the 2035-40 target.  There's just nothing to add based on the recent action, except to note that the longer SPX hangs around the current price zone, the higher the odds that the current wave extends.  As I've noted on several occasions, the "textbook" target for the current wave is 2071 +/-.

Beyond that, there's nothing else to add.  Bears should remain cautious if SPX can sustain trade north of the blue dashed resistance line.  Trade safe.

SPX and INDU: Giving the Bulls Some Airtime

SPX is finally getting a little bit tricky to read.  For the near-term, we've been on the right side of this move (heading both directions) ever since the Fed Spike to 2020 (the first time).  Since then, at each inflection point, the market has tipped its hand just a little, allowing the preferred count to capture virtually every dollar of the rally from 1871.  Intermediate-term, we've been on the right side of the trade since the all-time-high. 

But right now, the near-term has become a bit veiled, and the intermediate picture along with it.

We could be completing a large c-wave rally -- but there are no signs of a turn yet, so it's quite possible the move has farther to run.  My current instinct is that we may see a correction unfold here, but the final highs probably aren't in just yet.  Don't hold me to that, though:  sometimes the market just doesn't want us to know for sure what's coming next.  My system got us about 150 points off the low -- right now, that's all I've got.  If your system is giving you some type of actionable signal here, then by all means, follow that.  I'll let readers know when the wave patterns allow me to form another strong(er) opinion.

TRAN is interesting now, inasmuch as it stalled shy of the next key upside level, then started to back away from that level.  This keeps all options open for the time being.

I can't do much to influence the market, but for the sake of bears, I'll try to do my part here.  Speaking generally, I can sometimes completely end a move by finally giving more airtime to a wave count that considers the preferred count may have been too conservative or too aggressive. (I'm being facetious, of course -- I can't end a move all by myself!  It takes thousands of readers collectively considering whatever chart I put up, in order to end the move.  It's more of a group effort!) 

So, here's a chart that could end this rally:  A more bullish flat than previously supposed.

Here's another interesting chart:  The red line represents the approximate boundary of the Massive Multi-year Megaphone (or "MMM" for short -- no relation to the sound people make about ice cream, or to Massive Multiplayer Online gaming.).  If you don't know what Megaphone I'm referring to, just Google "Fully leveraged short position total account wipeout jaws of death the top is in.  Again." and you'll probably pull up 70-80,000 references -- mostly from folks who were a little early.

In conclusion, we're into an inflection zone that could generate a turn if this is a basic (c)-wave with a very simple and straightforward structure (approximate percentage of the time a structure is completely straightforward: 0.0002%).  We're still a little short (no pun intended) of the "textbook" target for this wave, though, so it's quite possible there's more room for the rally to run, and my instinct is that it probably will run at least a bit farther, possibly after a correction.  Nevertheless, we're very near a point of perfect balance, so I'll keep watch for impulsive waves in the downward direction, which will be our first solid indication of a turn -- and I'll also keep watch for near-term patterns that signal how much more upside could be left (if any, of course).  Until then, trade safe. 

SPX Update: Market Validates Near-term Preferred Count

The preferred count in Wednesday's update anticipated that SPX was forming an expanded flat, and headed down to test support near the breakout level.  Wednesday's update ended with:

In conclusion, we can't rule out an immediately bearish wave -- i.e., we can't rule out the idea that ALL OF (c) is complete.  However, that presently appears to be at least a slight underdog to the idea that (c) (or "3" for the bulls) is still unfolding.  If bears begin claiming levels that should be acting as support, then we may have to give bears more credit.

Bears never broke support, instead the market did a perfect back-test.  On Thursday I did a quick "bonus" update at no additional charge (yours to keep even if you return the set of steak knives!), and noted that:

...we do currently have enough waves down for a complete C-wave decline, if that's what the market wants, and futures are currently green.  If that low breaks down in a significant fashion, then bulls should respect that as potential trouble -- vice-versa for bears if INDU can break back up into the topping pattern.

The low never broke, and the count of a complete C-wave decline proved out.

So here we are again, in an "the easy money is over" situation, and we're reduced to simple trend following until the market gives us its next clear signal.

Bigger picture, let's not get too focused on the (c)-wave count as the "only" count.  There are definitely bull options for this to be a third wave, so there's no need to sell every new high.  The worst disease for bears to get right now is "Fear of Missing the Top," because this leads to emotional trading and bad decisions.  Tops are usually pretty clear.  Worst case, you get something like the Fed Spike we had last month and an abrupt reversal.  So what.  That move made the market's intentions obvious immediately -- and there was still plenty of money to be made following the preferred count into its target zone of 1865-80 SPX. 

As noted previously, even a bearish c-wave could extend as high as 2071 (and a bull wave would make new all-time highs), so without an impulsive decline (and a corresponding top) to act against, front running a wave like this can be hazardous to one's account, especially since there are no clear stop levels.

In conclusion, the preferred near-term counts have been consistent big winners recently, but at the moment, there's nothing new in the chart to draw a new short-term signal from.  The last signal was to buy support, and there's nothing to reverse that signal yet.  The next signal will come soon enough.  Until then, trade safe, and have a great weekend.

INDU: Bonus Bear Chart

Just a super-short update, with a "bonus" bear chart today.  If we take away all the fancy wave counts, we're left with this interesting back-test and rejection at the red neckline.  Funny thing is, I drew this chart weeks ago, and just stumbled across is last night.  The red line was already on it -- and so we do have to respect that, so far, it's acting like resistance.  It's is worth paying attention to whether the market can make its way back up through the resistance of that distribution pattern at the top:

Not much more to add -- we do currently have enough waves down for a complete C-wave decline, if that's what the market wants, and futures are currently green.  If that low breaks down in a significant fashion, then bulls should respect that as potential trouble -- vice-versa for bears if INDU can break back up into the topping pattern.  Trade safe.

SPX Update

Last update anticipated that near-term higher prices were likely.  Yesterday, price obliged, largely confirming my view that the prior high was a b-wave.  It still appears reasonably likely that the high isn't in yet, based on the fact that the recent corrective fractal appears to have simply become more complex.  It's possible the low will be in this morning, but a bit lower isn't out of the question:

Zooming out a bit, bulls likely want to hold any pending back-tests, or risk ambiguity:

In conclusion, we can't rule out an immediately bearish wave -- i.e., we can't rule out the idea that ALL OF (c) is complete.  However, that presently appears to be at least a slight underdog to the idea that (c) (or "3" for the bulls) is still unfolding.  If bears begin claiming levels that should be acting as support, then we may have to give bears more credit.  It's a tough call here, only a few points off the high, but things should clarify more as they develop.  Trade safe.