SPX Update: Chop Zone Continues

Since last update, the Fed indeed raised rates, which is exactly what some bulls claim they wanted, because the Fed is "supposed" to raise rates during bull markets -- so (try to follow along with this) the fact that the Fed raised rates confirms that this is a bull market, and therefore: bullish.

That's sort of like saying:  "We have a theory that the sun is really hot, but we're not sure, so we're going to land a probe there and see if it melts.  If it melts, then the sun IS really hot.  And that would mean we win!"

Another argument I've heard is that rate increase amounts to increased revenue for the government, which amounts to increased SPENDING by the government, which amounts to economic stimulus, which leads to more money for everyone and thus strengthens the economy.  The problem with this logic is that it's stupid.

What?  Oh, sorry:  The problem with this logic is that it doesn't seem to acknowledge that the money first has to come from somewhere.  In this example, it comes from the economy.  So, even if the government were to turn around and spend 100% of the revenue it takes in, that's still not actually stimulating anything, it's just moving money around.  (Money that comes from the economy and then goes back to the economy results in zero net gain to the economy.  It's like standing in a pool with a bucket, filling the bucket with pool water, and then dumping that water back into the pool:  You're not actually adding any water to the pool!  You're just wasting everyone's time and creating "busy work" for yourself so you can feel important and tell your friends that it's entirely up to you to keep filling the pool... at least, that is, IF they want to keep swimming in it!  Those ingrates.  This example is, of course, absolutely NOTHING like what the government does.  Ha.  Ha ha.)

In any case, the point is that the Fed raised rates, and we can all argue about whether that's bullish or bearish or just something they pretty much had to do at this point -- and the market doesn't care.

Chart-wise, the chop zone continues to look like a chop zone, and no new information is conveyed within a chop zone -- so, accordingly, I'll continue sticking with my original read that 1993 is unlikely to be the "final" low of this move, although the pattern is doing its best to make things even more confusing.  Let's find out why, starting with the 30-minute SPX chart:

The hourly chart contains some additional discussion:

In conclusion, on one hand, it still doesn't appear that 1993 is a sustainable bottom, so ultimately, I believe the market is headed lower.  On the other hand, very short-term, the proposed C-wave "should" have continued higher than 2076, so for now, I'm going to assume it's incomplete and thus could still headed higher BEFORE heading lower.  The outlier possibility is that 2076 represents the top of a failed C-wave and complete as-is, which would potentially be quite bearish.  Trade safe.

SPX and BKX Updates: Fed Day

Last update concluded with:

...my "perfect world" count would see us rally back up to retest the high again, then decline back to test the most recent relative low (either Friday's low, or a minor new low this week). 

SPX made a minor new low, then launched into a strong rally, so that "perfect world" outlook is looking reasonable at the moment.

Beyond the charts:  Today is, of course, the infamous and aptly-named Fed Friday (which often falls on Wednesday, due to a repeating error on the government calendar).  The investment world is anxiously awaiting the events of this afternoon, when Janet "Gellin' Like Janet" Yellen will emerge from the Fed's Reality-Deprivation Chamber, where she's been sealed since birth; if she sees her shadow, the Fed will hike interest rates for six whole weeks, or until such time as the economy weakens further, whichever comes first.

Bulls are hoping for rates to remain steady at -4000%, which is the same level they've been since the earth cooled.  Some folks have been saying that bulls want Janet to raise rates, because: reasons.  But regardless of what bulls may say publicly, the reality is that bulls are secretly hoping Janet will LOWER rates to an economy-stimulating -18,000%, while at the same time launching QE IV: The Revenge of the Fiat, just in time to compete with the latest Star Wars movie. (Or is it QE five?  Six?  I've lost count.)

Anyway, Fed Fridays are usually volatile days, frequently punctuated with whippy price action that reflects the underlying bull and bear angst, and often burning one side badly... just before burning the other side badly.  Accordingly, we're going to simply stick with my original read that we'll rally back to retest the recent high before dropping back down.

Obviously, if we experience a sustained breakdown of Monday's low, then all bets are off for a retest of the high; and on the other side of the trade, if we break out over 2117, then it's possible that ALL OF Bull (iv)/2 is complete.

Here's a simpler hourly chart of SPX:

And finally, another look at BKX:

In conclusion, the market has followed my expectations from the last several updates, albeit not to the penny, but well enough.  Given that, and the fact that it's Fed Friday, there's no reason to form any new theories.  Trade safe.

SPX, NYA, INDU: Looking Back to Look Forward

This has been, and remains, a difficult wave to count.  The most interesting fact for bears is how the market turned right at the bear inflection point that was identified more than a month ago, and how that price point has continued to contain all rally attempts.

Let's take a look at some of the market's options from here.  We'll start with the bigger picture INDU flat, which was first hypothesized nearly two months ago.  That count isn't a "done deal," by any means, but it's certainly alive and well.  Bulls still have options for a bullish fourth wave, and those options remain reasonable for the time being.

NYA also revealed the inflection point in real-time, and that point has continued to hold:

A slightly larger view of NYA:

Finally, SPX continues to amaze by following the path outlined all the way back on October 23.  More recently, there was a bit of confusion near 2093, which I believe resulted from a failed wave.  In my opinion, the wave from red (b) to red (c) is impulsive -- and therefore likely to be a rare "failed" (c)-wave. 

Just for fun, here's the original annotation from October 23 (second one down):

In conclusion, bears have kept their intermediate options open by continuing to hold the price point where the rally needed to end for the most bearish counts to stay alive.  That doesn't necessarily mean the bears win yet; it simply means the market "saw" that price point the same way I did, and is respecting the bear options.

On the other side of the coin, thus far bull have held the near term zones they need to.  All that could change today, of course -- but at this exact moment, nothing has been set in stone just yet.  This remains a difficult wave, so I would recommend neither side get complacent here.

Just for fun, my "perfect world" count would see us rally back up to retest the high again, then decline back to test the most recent relative low (either Friday's low, or a minor new low this week).  The bottom line, though, is that bulls need SPX to sustain a breakout over 2117, and more importantly, the all-time-high.  Otherwise, best case for bulls is probably a sideways grind; worst case is a significant decline.  Trade safe.

BKX: The Most Unpredictable Wave of 2015?

This market's a bit of a beast right now, and we haven't seen a move this messy and overlapping since well prior to the August flash crash.  Today we're going to look at BKX for the options, because this index has claimed both its most recent prior swing high and prior swing low, which are two things SPX has not done yet.

One point that we haven't rehashed in a while is the ongoing possibility that the rally from October to November was all part of the C-wave of a large flat.  Because BKX has NOT reclaimed its November high, which came at a key infection point (specifically: after five complete rally waves, as noted on November 9), that bearish intermediate option remains very much alive from a technical standpoint.  Therefore, this remains a significant technical inflection point in the big picture, because if that rally was simply a C-wave, BKX would be expected to break the October lows. 

Due to the nature of the near-term pattern, though, more sideways chop wouldn't be at all surprising.  In my opinion, the current wave is one of the most unpredictable waves we've seen for all of 2015, so we'll simply have to await a bit more information from the market.  Note that the options on BKX and SPX should be similar.  Trade safe.

SPX and BKX: Market May Be about to Get Even More Wild

Last update expected SPX would break 2097, and, for once, the market said (this is a direct quote): "The heck with that, Imma do something weird instead."

On BKX, I had noted the possibility for a complex flat, and that may be what's unfolding, but this pattern has options to get even weirder than shown.  Before we worry too much about that, though, let's take a look at the most "obvious" (and I use that term loosely) potential:

On SPX, things would have to shake out in a similar fashion -- if this is indeed a complex flat, of course.  There are bear options here, too, and they can't be ruled out yet.  As I mentioned on 11/25, the market still hasn't broken out over resistance, and (okay, this one IS a direct quote for real): "don't get caught looking up PAST resistance that hasn't even been tested yet.  Stick to the present and see how the market reacts."  Thus, the chart below covers the bear options in a bit more detail, at the hourly level:

Finally, the near-term chart simply shows the first informational levels, and notes that there's another way for a complex flat to fit here if 2042 breaks.

In conclusion, the market hasn't quite moved back into ambiguous territory, but it's awfully close to doing so.  The good news is that while it may not be entirely predictable from the current vantage point, there are certain tells that we know to watch for here, and if we see those tells, we'll be able to get a stronger read of the move that will follow in their wake.  In the meantime, trade safe.

SPX and BKX: "Why Yes. Yes It Is."

Last update (See: "Is the Recent Decline a Buy Op?") determined that a near-term expanded flat was the most probable pattern:

In conclusion, because of the near-term pattern in SPX, I'm very slightly inclined to think that the recent waterfall decline is actually the c-wave of an expanded flat, and therefore destined to recover...  In a perfect world, bulls would like to see SPX rally from here, and bears should stay nimble since the decline could have been a small second wave and about to launch back up.

Friday's market obliged that outlook.  It's funny how well Elliott Wave works once the market tips its hand... sometimes we have to wait for a while for that to happen, but it does happen eventually.  One of the keys to successful trading is patience, and I've always liked the following quote from the movie Rounders (which was about poker):  "Get your money in when you have the best of it; get it out when you don't." 

Patterns that provide us higher-probability reads can be likened to starting with pocket Aces in Texas Hold 'Em:  They don't guarantee you're going to win, but they do put the odds in your favor.  Patterns with no clear reads are similar to playing a starting hand such as jack-8 off-suit.  Maybe you'll get lucky and win -- but most of the time you're just handing off your money to someone who holds a better hand than you, and/or who has more discipline.

Let's get to the charts.  SPX was the "tell" on Thursday, because the subdivisions didn't fit for a bearish pattern -- and I hope I conveyed that well enough in Friday's pre-market update:

Bigger picture, SPX could still make things difficult for everyone:

BKX already broke its prior swing high.  Although its options are the same as SPX, I'm continuing to track it as something of a "compare and contrast" litmus test against SPX.  If one or the other starts diverging, it might clue us in early to the market's next intentions:

In conclusion, the near-term waves were clear on Thursday night and allowed the read for a "launch back up."  At this juncture, though, the market does have a couple options.  At the minimum, I would expect SPX to break 2097 from here, but at that point, we do have to stay alert to the potential for an even more complex flat.  Trade safe.

SPX, BKX, RUT: Is The Recent Decline a Buy Op?

Last update talked about the potential for a complex expanded flat C-wave decline, and the market has decided to make this as complex as it can.

Let's start with BKX -- last update I stated:  "It's tough to find a pattern that doesn't ultimately exceed 76.68."  BKX exceeded that level shortly thereafter, which (perhaps ironically), gives the pattern more bear potential that it had on Wednesday:

RUT met with rejection perfectly off the noted resistance level. 

Finally, SPX might be the clearest index here:

In conclusion, because of the near-term pattern in SPX, I'm very slightly inclined to think that the recent waterfall decline is actually the c-wave of an expanded flat, and therefore destined to recover.  If SPX sustains trade south of 2019, that would at least remove some of the bull options, but not all the bull options, since the whole decline could still be a c-wave at one higher degree.  In a perfect world, bulls would like to see SPX rally from here, and bears should stay nimble since the decline could have been a small second wave and about to launch back up.  Below 2019 and we'll have to at least consider more bearish options.  Trade safe.