SPX, INDU, RUT: No Material Change

Not much to add from the prior update, except that hopefully bears were discouraged from shorting or quick to abandon any "almost zero risk" shorts after SPX broke 2252.

Today, we'll focus mainly on the bigger picture, since trying to trade near term waves in any direction other than "up," has been pointless lately.

First off, let's look at INDU, which suggests that the rally isn't going to form an intermediate top in the immediate future.  Comparing this move with 2013 suggests that such a top could be forestalled  for longer than would seem reasonable:

For SPX, the 2400 target remains on the table:

Meanwhile, RUT has continued its rocket launch.  Obviously, this can't go on forever without a correction, but until there are clear signs of one, there's not much to do but ride the trend:

In conclusion, some type of correction is overdue, but this hasn't been the kind of move that's wise to front-run against.  This is a third wave rally -- and just as indicators get pegged to the downside during third wave declines, they can get pegged to the upside during third wave rallies.  Trade safe.

SPX, RUT, BKX: Understanding What It All Means

It has recently come to my attention that I have not done enough 'splaining ("explaining") regarding the implications behind some of the labels that have been on my charts for the past few months, so today we're going to expand on what the "Bull 2 or Something" label meant (and means) to the market heading forward.

I first began verbally referencing the bull count on July 11, when I noted it would have a target of 2490 SPX.  I'm pretty sure the first time I actually placed the "Bull 2" label on the chart graphically was on September 26.  I placed it at 2080 SPX.  The bottom ended up being 2083 SPX.  So, even though I wasn't favoring that count, I still feel that providing a "2nd choice" count that ended up being accurate to within 3 points was in itself no small feat.

But I digress.  The point is that a "Bull 2" bottom would mean a "Bull 3" rally.  And third waves are almost always the longest and strongest waves, which is why I wrote numerous times that bears simply had to stand aside if SPX broke above 2194.  Let's look at those implications of "Bull 3" in more depth, starting with a chart of RUT:

Next we'll look at BKX.  On November 18, I commented about the BKX chart as follows: 

There may be a correction pending, since BKX is challenging intermediate resistance, but by all normal rights, it's hard to imagine this BXK pattern not ultimately continuing higher toward black V.  So, even if there is a correction soon, odds are reasonable that it will be a buy op.

While I was obviously anticipating that the rally would continue, when I wrote that, by no means did I envision that BKX would be within spitting distance of black V in only a few short weeks (!).  Yet here we are.  "Or V?" has been added on the chart below to reflect that reality:

And again, I highlight this move in BKX to drive home a point:  WHY front-run bets on a reversal against potentials like this?  Sure, maybe you end up getting lucky and nailing the top, and you can look back and feel like you did the right thing because you ended up in profit.  But did you actually do the right thing?  Or would you simply be justifying a bad trade using results-oriented reasoning? 

In trading, just as in other aspects of life, not all winning plays are GOOD plays.  The end does not justify the means.  More often than not, front-running reversals during patterns such as this leads to losing.  And consider it this way:  IF the pattern is indeed a third wave, then front-running reversals (for more than a brief short-term scalp, anyway) will end up losing exactly 100% of the time, without exception. 

For further consideration:  Betting on reversals also precludes the opportunity to profit on the long side of the trade, which can be significant during strongly-trending markets.

Of course, the caveat is "if" this is a third wave.  We never really know anything for certain.  Heck, even the most sure-fire bets have risks: I can bet that the sun will rise tomorrow and the day after, but there's always the possibility a dark star will come ripping through our solar system tonight and tear the earth from its orbit or something.

So:  Can the market reverse on a dime today, or any day, and punish all long traders viciously?  Absolutely.  Anything is possible, essentially at all times.  But why (and "how," for that matter) would we trade "any random possibility"?  Should we not instead always attempt to trade the highest-probability potential (presuming we can obtain that trade with manageable risk), at least as much as humanly possible?  And if we can't trade with the market on that potential, should we not at least avoid betting AGAINST the odds-on favorites? 

I am again reminded of something my father once said:  "Once you understand the odds, you never have to 'try to beat' them."

Now, to shift gears and give one example of "how to at least limit random trades," let's look at SPX's 1-minute chart for an example of the type of thing you'd look for if you just HAD to bet against a strongly-trending rally:

In conclusion, ever since SPX claimed 2194, I have been viewing this rally as "most likely" a third wave.  Recently I realized that perhaps I needed to expand on what that meant, particularly to benefit readers who are not as well-versed in Elliott Wave -- so hopefully today's article gets everyone up to speed. 

Now, can I promise the third wave bull count is the dead-on "right count" with 100% guarantee?  No way.  But it's the leader right now, so it has to be respected as such.  If it's not "the" count, then the market will show us that, and will almost certainly provide us the chance to adjust our expectations and to take appropriate action.  Trade safe.

    

SPX, BKX, RUT Updates

Due to internet issues, last "update" was incredibly short and to the point, noting that nothing bearish had happened so far, and that the decline appeared to be a normal rally correction.  Since then, RUT, INDU, and BKX have all made new highs.  NYA has finally broken above its prior swing high. 

With numerous markets clearing resistance, bears have nothing to sink their claws into yet, and will simply have to continue awaiting greener pastures.  As I've stated on a few occasions during the past few weeks, there's just no good reason to front-run against a move like this.  Once we see something that resembles an impulsive turn lower, then bears can consider stepping out of the shadows -- but until then, the trend is clearly up at all degrees right now, so it's still the bulls' ballgame.

RUT's potential target from November 16 remains active:

RUT's recent decline found support at a support level that had been previously identified:

BKX is still on a tear (continued, next page):

No News is Good News

I've been having major internet connectivity and speed issues tonight, so after quite a bit of frustration, I've decided to forego the update today, since I can't get charts uploaded.  There's no real change from the prior two updates anyway -- so far, nothing that's happened has been outside the realm of "normal rally correction" territory.  That could always change today, of course, but as of this exact moment, nothing terribly exciting has happened in the past few sessions.  Trade safe.

SPX, INDU, RUT, BKX Updates

Some markets lend themselves to grand-sweeping predictions, while others are best off being allowed free reign, and thus better-served by being "reacted to" than predicted.  This market is presently in the category of the latter. 

As an example:  RUT recently failed a back-test of a zone that bulls were hoping would act as support, and one could have used that failure (especially the retest from below) as an exit point for longs.  One can now watch how RUT proceeds from here and react accordingly.

BKX is currently in the earlier stages of testing a similar zone:

INDU is testing resistance from below:

Near-term, SPX proved out the hypothesis I put forth in the prior update:

In conclusion, I don't have much to offer in the way of near-term predictions from the market's current position.  Presently I'm primarily in "reaction mode" (for example, on Wednesday in our private forums, I suggested if 2204 broke, it would probably make a good exit point for longs, which saved folks some drawdown), and I'm avoiding front-running.  In time, everything will clarify, like it always does -- so there's never any need to "force" the market to constantly fit into some preconceived idea or other.  Traders need to have more than one tool in their arsenals.  Trade safe.

SPX and RUT: "Dogs and Cats Living Together... Mass Hysteria!"

The last couple session saw SPX plummet in an uncontrollable free-fall, ultimately dropping a total of more than 8 entire points on a closing basis.  Panic set in briefly at the Fed, and Janet Yellen called a secret emergency meeting to brief Board members on what the color "red" meant.  My sources tell me that she assured them it was only temporary, and was able to stave off the very real potential of mass suicide.

Looking at the charts, we can see that, so far anyway, SPX has simply back-tested the intermediate red line from above.  Bears need to force a sustained breakdown at yesterday's low to create another Fed meeting:

Near-term, SPX pretty much ignored the lower trend line.  This means that either we just witnessed a small-degree fourth wave, or that bears fired a warning shot.  We start thinking warning shot only if there's a sustained breakdown at the aforementioned levels:

RUT has also tested a trend line from above:

In conclusion, the immediate levels bears need are at least clear.  Those levels don't guarantee the correction will get much bigger, but they at least create the opportunity for a bigger correction, so they're certainly worth paying attention to, and can act as "complacency checkpoints" for bulls (as in, "check your complacency at the door below these levels").  Presently, though, all we have is normal back-tests of previous resistance -- and so far they have acted as support.  Trade safe.

SPX, INDU, BKX: Trending Markets are Boring

Well, I hope all my readers had a pleasant Thanksgiving, and remembered to give thanks for whatever it is that they're thankful for, in the spirit of thankfulnessicity.  I do believe it was Napoleon Hill who taught that thankfulness/gratitude is one key to achieving and maintaining abundance.  And (a few years before him) so did Jesus, for that matter, by saying:  "For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath."  My interpretation of that has always been that it makes the most sense in the context of attitude.  (Apologies if I've offended anyone who associates the Bible with someone they may know who's particularly obnoxious -- that's like associating all of America with one particularly obnoxious citizen, and a bit too small-minded for my personal taste.)

So far, SPX has continued holding all relevant support levels, so there's as yet nothing for bears to get too excited about there, however, we do have INDU and BKX testing resistance levels -- and INDU is doing so in an extremely overbought condition, as we'll see on the upcoming charts.  The problem bears do need to keep in mind is that, so far anyway, resistance hasn't done anything other than pause the rally each time.  There's no such thing as permanent resistance in a bull market.

Let's start with SPX's near-term chart:

Bigger picture, SPX has recently cleared a trend line that came into play quite frequently over the past few months:

INDU reached its next target zone -- we'll see if that offers anything in the form of resistance:

And finally, BKX has now almost-perfectly tagged the intermediate confluence I mentioned a while back:

In conclusion, there's nothing to do in a market like this but follow the trend until such a point that the market says we shouldn't.  So until we see an impulsive turn lower, there's no compelling reason for bears to come out of the shadows.  Trade safe.