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Wednesday, November 16, 2016

SPX and RUT: What Might We Expect if the Market Breaks Through the Current Inflection Zone?


SPX has continued to remain below the all-time-high, but before we look at that (currently boring) chart, let's look at RUT, and consider the implications if the current inflection zone fails to put the brakes on the market:


The updated 60-minute RUT chart contains some discussion about a distinction that I believe is one of the most important understandings for people with an appetite for risk (present company included):


I made a slight adjustment on the SPX chart, although it amounts to a moot point if the market ends up simply barreling through the current inflection zone. 


In conclusion, SPX remains in an inflection zone, so this is the place for bears to take a stab if they're so inclined.  Yesterday presented a second opportunity at 2180, with manageable risk -- now all that's left is to watch and wait for the market to do its thing, or not.  On balance, I'm probably still inclined to think we head toward red C, but it's far from being a clear call.  Along those lines, I again feel obligated to restate how important it is to respect any sustained breakout from the market's current position, should a sustained breakout occur.  Trade safe.

Monday, November 14, 2016

SPX and INDU Updates


Friday was an inside day, remaining within the range of Thursday's prices.  This leaves things little changed from the prior update, so today we're simply going to give the bulls some additional intermediate airtime via the Dow Jones Industrial Average.

First up is SPX, which hasn't changed materially.  I am still very alert to the fact that SPX found support and staged a strong rally from the standing tongue-in-cheek "Bull 2 (or something)" zone that has been posted on this chart for a couple months now.  That's one of the fun things about Elliott Wave -- you might not always be able to predict exactly what the market will do, but you can often identify the key inflection points that could reverse the market.  As they say, forewarned is forearmed... so at least the possibility of a strong bounce/rally from the 2100 zone was something we were aware of well ahead of time.


On INDU, I've filled in a few of the potential bull targets with a bit more detail.  I really didn't buy into the pattern as huge 1-2 bull nest, but if INDU doesn't reverse soon, then I'm going to have no reasonable choice but to treat it as that most bullish 1-2 option until the market says not to.  As I discussed back in July, this has always been a difficult pattern for bears, because (as I wrote then) "their main hope is a big counter-trend decline."  So if this breakout sticks, then we'll just have to assume that counter-trend decline isn't going to be materializing for the time being.


In conclusion, it's still "last call for bears."  So far, they've managed to at least slow, and partially reverse, the rally at the 2180 SPX inflection point.  But from here, if bulls can sustain a solid breakout over the all-time-high, then bears will probably need to hibernate for a while.  There is significant potential energy in this pattern, so bulls may be able to capitalize on that and keep the rally going for longer than will seem reasonable.  Trade safe.

Friday, November 11, 2016

SPX and RUT: Last Call for Bears


When we broke 2119 to the downside back in early-October, my first instinct was that SPX was forming an expanded flat, and that we'd see a rally, in wave 2/B, to 2180 SPX.  Then we had another breakdown, and I wrote that the 2/B rally was still alive, but that we had to "assume the most bearish count until proven otherwise" -- because what else can you do at that point?  There are times the market sets itself up into a pattern with great potential energy, and that energy always has to be respected -- in much the same way that you wouldn't run around blindly in an open field during a violent electrical storm.  Maybe you won't get hit by lightning, but you have to deeply respect that you very well could be.  But just as with an electrical storm, sometimes that energy never connects, and thus never gets farther than the "potential" stage.  Unfortunately, there's just not much you can do about it other than protect yourself along the way via stops.

Yesterday, we finally reached 2180+, which was the target for the 2/B count, and SPX reacted to that zone with a decent rejection.  Now it's up to bears to keep pushing.

In the event SPX sustains a breakout over the all-time-high, then we're back into a situation where we'd need to respect the potential energy of the pattern, but this time to the upside.  From a technical standpoint, do be aware that a break of the ATH does NOT technically invalidate the bearish C-wave.  It just makes it really hard to trade, and possibly ill-advised (running around an open field during a lightning storm again...) until there's an impulsive downside reversal.  Thus, bears would like to see the ATH hold, because that makes the trade manageable, and keeps the stop zone clear.

Somewhere in here, I need to note that it's worth a reminder that the bond market is closed today due to Veteran's Day, so I'm putting that here.  Or, uh, "there" (see prior sentence), as the case may be.



RUT has been a rocket ship ever since its target capture:


Of note, INDU did breach its all-time-high.  From an Elliott Wave perspective, that breach can still potentially be counted as a fifth wave, so it's not the end of the world for bears just yet... but they do need to make a stand pretty darn soon to hold out hope for an intermediate decline.  It's the moment of truth for the 2B wave, and for bears in general... at least for the immediate future.   Trade safe.

Wednesday, November 9, 2016

Updates for the (soon to be renamed) Trump 500 ($SPX) and The Trump Industrial Average ($TRUMP)


For a long time now, I've had my intermediate charts marked with the projection for a large C-wave decline, and I've been wondering from whence the catalyst for such a decline might come.  Tonight, it appears Donald "The Donald Trump" Trump has been declared the next President of the United States of 'merica, and that may be as good a catalyst as any.

As Trump's victory grew more apparent, futures began tanking, largely because Trump has threatened to rename Wall Street as "TRUMP Wall Street," which made traders nervous.  Wall Street had also priced in a Clinton victory -- which was apparently worth at least 100 ES points, probably because Hillary had promised "a pantsuit in every closet," which led to a growing bubble in the overweighted pantsuit manufacturing industry, which now accounts for nearly 38% of the total market cap of the S&P 500.

Compounding Wall Street's fear is the fact that Trump has repeatedly vowed to abolish attractive hairstyles, which means that many hedge funds managers will either lose their jobs, or be forced to show up at work wearing "no less than three" dead ferrets on their heads.

(WARNING:  Rant Alert!)  First of all, let me preface this next comment by stating for the record that I, personally, did NOT vote in this election.  The candidate I liked (and also happen to know personally) had zero chance of winning, and while I applaud those people who feel it's their Red (or Blue) Blooded Patriotic American Duty to vote, I am not one of those people.

Now, that said, and my functional neutrality has been declared...

I, for one, am looking forward to the elite news media helping to "unify the country" and
"put all the bickering behind us" by doing things such as declaring Trump's victory to be the equivalent of half of America voting in favor of live televised executions of minority group members, and how the only people who voted for Trump are illiterate gun-toting morons who live in bomb-shelters and drink applesauce through straws.  Hmm... why do I feel like I've seen this movie before?  One commentator I heard tonight even went so far as to suggest that Trump was carried to victory on the backs of racial bigots, as a backlash against Obama being black.  That's the stupidest thing I've ever heard.  How can one even present that reasoning after Obama already won (and served) a SECOND term?  

Again, I assure you I had no horse in this race.  I mention all this because I've now heard variations on this basic theme twice already tonight, from two different networks -- and it bothers me on a fundamental level.  No matter who you supported, it should bother you, too.  For crying out loud, somebody needs to say SOMETHING about it.  Personally, I don't understand how the elite media can preach tolerance on one hand, while at the same time belittling and disparaging anyone who's "different from them" on the other hand.  You can't have it both ways.  You can't demand tolerance for "people who agree with you," while behaving as if you're terrified of everyone who doesn't -- in fact, fear is the very emotion that lies at the heart of virtually all intolerance.  The whole point of being tolerant is to learn to respect people who are different from you, whether you understand them or not.  Not to act fearful of them, not to try and frame them as "damaged," and not to try and ascribe nefarious motivations to them -- simply because you don't understand their motivations in the first place.  Just accept that you don't understand and leave it at that.  It doesn't make them "inferior."  Who knows, maybe it makes you inferior for not being able to grasp it all.

Anyway, now that I've assured that I'm going to get angry letters from someone out there, let's get to the charts!

There's no real change to anything -- SPX briefly cleared the level I'd noted as important resistance (2140), then fell back below it, and closed right on it, at 2139.



 INDU:


In conclusion, the simple version of everything is that bulls need the all-time-highs to cast doubt on the intermediate counts, while bears need the recent lows.  Trade safe.


Monday, November 7, 2016

SPX and RUT: Patience Isn't Just a Virtue, It's a Necessity


What's the one aspect of a trade that we can't control, no matter how hard we try?  Well, in order to answer that, let's start with what we CAN control.  We can control our entries.  We can (barring gaps), control our exits.  So we can control our risk for the most part -- and, with that, come all the aspects of discipline to achieve that control, of course: i.e. - Controlling our emotions, controlling our reactions, etc..

But the one aspect that we cannot control, no matter how many positives we have going for us, is time.  In other words, we can't control whether a winning trade opportunity will present itself tomorrow, three days from now, or three weeks from now.  And that, in my experience, is the area most likely to get us into trouble.  Because we don't like waiting for things.  We all have aspects of the spoiled kid from Charlie and the Chocolate Factory present in our personalities, and we all "want an Oompa Loompa NOW, daddy!"  Not next week; not next month; and definitely not next year!

The catch 22 is that if we can't learn to wait patiently for good opportunities, then we'll never reach our goals at all.  Because our impatience will constantly cause us to take one step back (or worse) for every step we take forward, and our accounts will go nowhere (again: or worse).  Our impatience to succeed becomes the very stumbling block that keeps us from succeeding.

So the aspect that we most wish to control -- time -- is the very same aspect that we can never control.  And we all know it, whether we admit it or not.  We know that we can't "make" opportunities in trading, we can only find them and try to position in the right place at the right time.  To the degree that we accept that knowledge -- or the degree to which we rail against it -- is the degree at which we master patience.  And the degree to which we master patience is, at least in part, the same degree to which we master profitable trading.

The problem is the psychological pressure we all feel to get our Oompa Loompas NOW.  That's part of the pressure that can keep traders from cutting and running when a trade goes against them -- if they cut and run, then they absolutely can't "win NOW."  They have to go back to waiting.  So "being in the action" is perceived as the better choice.  If we're to be consistently successful, though, then we simply must learn to overcome that pressure and the temptation to try and "force the market to let us win" -- there is no other option.  Understanding that acting on that pressure actually delays our goals even longer can help.  Something my dad used to say, which he attributed to Tony Robbins, may also be useful to keep in mind:

"Most people overestimate what they can accomplish in a year, but underestimate what they can accomplish in a decade." 

Just some random food for thought.

Let's move on to the charts, starting with RUT:


SPX:



In conclusion, futures indicate a gap up in SPX, which will trap bears, and can be dangerous because those trapped shorts can potentially become rally fuel.  Thus, if various markets can sustain trade north of resistance levels, bears might have to play it cautiously and await more clarity.  If today's rally doesn't stick, or if the market is strongly rejected at resistance, then we may be dealing with a more simple backtest.  Trade safe.


Friday, November 4, 2016

SPX and RUT: RUT Captures First Downside Target


Since last update, RUT captured its first downside target, good for 30 points of profit.  Accordingly, I've added some additional info to this chart:



In the last two updates, I mentioned that unless there was a bullish whipsaw of the breakdown at 2114, then bears should probably treat this decline as the bear nest of 1's and 2's unless/until proven otherwise.  Nothing has changed in that regard.  Patterns like this are never guaranteed, but if we don't play them for their "most apparent" potential, then we will miss a lot of moves. 

SPX is now flirting with a breakdown at the red trend channel.  It closed marginally below that channel, but important breakdowns are often followed by choppy whipsaw action, to shake and punish newcomers who sold the breakdown -- so we may or may not see that type of reaction here.  I can't really predict that, given what's visible in the charts presently, but it's always a possibility to be aware of at times such as this.


In conclusion, presuming this breakdown sticks and doesn't whipsaw directly, then the most probable targets for SPX appear to be sub-1940, in line with the intermediate count I've been publishing for the past few weeks.  Trade safe.

Wednesday, November 2, 2016

SPX, NYA, INDU Updates: Finally


For what seems like the past 2,700 years, I've been repeating that I felt 2114 was not a meaningful low, and that the only question in my mind was whether it would break directly or after another sucker rally.  Yesterday finally answered that question, and also proved that 2114 was, indeed, not a meaningful low.

Due to the nature of the pattern leading into the decline, we probably have to "assume" the most bearish iteration of the wave counts -- but do be aware that the blue 2/b count on the chart below is not technically dead yet, so if the market wants to throw a final bird at everyone, it can still follow that path:


NYA is unchanged, so I left the annotation from Halloween, which echoes the call to watch for the warning signals above.  That said, if bulls can't stick save this directly, we are likely on the cusp of a significant decline:


Finally, I haven't updated this INDU chart since July, so it's interesting to see how things have panned out since the last update here:


In conclusion, the market finally validated my thesis that 2114 would break, now it's up to the bears to run with it.  The potential energy is present in this pattern for a significant decline, so we have to play it that way until proven otherwise -- but it's not impossible that the market has one last trick up its sleeve (in the form of the 2/b rally) so bears shouldn't get complacent and arrogant just yet.  Trade safe.