SPX and RUT: Are Fourth Waves Annoying, or Just Plain Awful?

We have a saying in Elliott Wave, when we Elliotticians gather in whatever places Elliotticians are found.  What we say, when we're gathered amongst ourselves, far away from the autograph seekers and the paparazzi, is:  "Everybody loves 'em a good fourth wave."  Then we mimic a perfect Fibonacci spiral with our thumb and forefinger, and we add:  "Not!"

Then we laugh hysterically, because we're easily amused, us Elliotticians.

It appears that SPX has decided to continue its triangle, which was something I noted could happen in the last update, because I've been around this block a few times and I've seen what these sneaky bastage fourth waves can do -- because they hate us, these fourth waves.

RUT has back-tested its black trend channel -- thus far, successfully.  Given how far RUT came in such a short time, a minor break back into the channel isn't out of the question.  Bulls obviously don't want to see a major break back in:

In conclusion, SPX has continued its sideways grind.  The triangle stays on the table as long as 2248 holds, and targets 2288-2300.  As an aside, does anyone else find the now-constant play-by-play on "Dow 20,000" to be getting a bit tired?  Every day, I have between 50 and 1000 new emails from Marketwatch alone, that all read like this:

Dow Retreats 9/100ths of a Point Farther from 20,000, Oh the Horror

Dow Shakes off 9/100ths of a Point Morning Retreat to Put 20,000 Back on the Table, Huzzah!

Dow Moves Toward 20,000... No, Away!  No... Wait, Hang On, We'll Send Another Email in a Second...

Dow to Officially Be Renamed as "Dow 20,000," Thus Finally Rendering This Play-by-Play Irrelevant

Beyond that, I'd like to wish all my readers a happy and safe holiday season.  As is now tradition, I'll link to a non-market-related article that I first published in 2013:  A Christmas Story -- Reflections on What Matters.

I truly hope everyone enjoys this time with their loved ones.  Trade safe.

SPX Update: SPX is Poised for (sound of retching)

A slightly-late and super brief update today, because I've been down most of the evening with a very nasty stomach bug (presumably food poisoning) and am quite under the weather.

Below is the update to the triangle count.  Note that until SPX clears 2277, the triangle could still be unfolding, and it's not impossible for the rally from 2248 to all be part of a complex b-wave (so it could be red b, with red c/d/e still to come (!)).  For everyone's sake, let's hope that's not the case -- but it is technically possible.

Sorry for the short update today.  I'm going to go throw up again now.  :)  Trade safe.

SPX Update: Please Do Not Adjust Your Television Set...

Friday saw traders everywhere vigorously scrubbing their screens with Windex in an attempt to erase the strange little "-" symbol that had appeared in front of their price quotes, while brokers' tech support lines were inundated with calls demanding to know why they had changed their color palettes from green to red.  Confusion quickly turned to panic as the S&P 500 closed down almost 4 points, sparking a rash of questions and rampant speculation as to whether the next bear market had finally begun.

The Fed held another secret meeting and vowed to henceforth raise interest rates ONLY if a 50%+ rally had occurred since the last rate hike, lest they spook the market and cause another Lehman-type event -- which could cause years worth of hard-earned bubble gains to vanish faster than you could say "Janet Yellen smells like Doritos."  (Although why anyone would even imply such a vicious rumor is completely beyond me.  Nevertheless, I challenge you to try NOT to think about this next time you're watching Yellen on TV.)

Meanwhile, due to the massive move of only 4 points, there is no material change to Friday's update, except to expand upon how a triangle may or may not be continuing to unfold here:

In conclusion, there's really nothing else to add from Friday's update.  Trade safe.
 

SPX and INDU: Fed Raises Rates, Market Burps Quietly in Response... Next Levels to Watch

On Wednesday, the United Federation of Planets ("Fed") did something it has only done once in the past 10 years:  It voted to have hors d'oeuvres (pronounced "horse's doovers") served at the next meeting. 

It also raised interest rates in our sector of the galaxy by one-quarter portion (okay, now I'm mixing sci-fi franchises, which is a major no-no!).  Anyway, this means that the previously-booming dilithium crystal refinancing market will slow considerably, since nobody wants to refinance their dilithium at a higher rate -- if you could imagine! 

Everyone is now expecting three (3) quarter-point rate increases in 2017, which seems a bit silly, inasmuch as I thought we were expecting something along those lines for 2016, but it never happened because the Fed chickened out repeatedly.  According to Janet Yellen, this was due to "reasons," which included (in order):  "The chance of evening thundershowers; that one hurricane that almost hit somewhere; the Cubs winning the World Series."

As timid as this Fed has shown itself to be, all it will take is one marginal job report to put the brakes on this "three rate increase" schedule. 

The market reacted as though it was surprised by the current rate increase, which is also silly, and the rally went whatever direction is the opposite of "up" (there's a word for this other direction, but I can't remember it.  Starts with a "D" I think.  Darn?  Dane?  It'll come to me.).

Near-term, the market has a few options, but clear levels which will eliminate some of those options:

   
I should also note that there are a couple less-common patterns that could fit the present wave structure, but for ease of reader consumption, I'm keeping those to myself and merely watching to see if the market makes the "next step" in those patterns, upon which I would then discuss them publicly.

Taking a look at INDU's chart:  For all practical purposes, INDU captured its 20,000 target.  This means that, heck, sure, the rally could be over, why not?  But that seems unlikely, given the supporting evidence.

  
In conclusion, the near-term pattern indicates that the market has kept its options open, but presently, it's unlikely we've arrived at any sort of long-term top.  However, in the event bears were to kick out 2240 with authority, then we'd at least have to consider the possibility of a larger correction unfolding in the interim, which would cause the market to head... um... "down"!  That's the word I was looking for earlier.  Trade safe.

INDU Update (Brought to you by The World's Least Reliable 4G Network!)

Still no real change, except to mention that NYA made a new all-time high yesterday (it had been lagging SPX and INDU).  This is the type of market that can burn traders out of sheer boredom.  We get bored with the move running on and on, and sometimes that leads to trying to predict turns more because we ourselves get anxious than because the market dictates such a prediction.

On another note, I've spent the last hour+ trying to get my internet functioning at better than dial-up speeds, and finally got it working about 10 minutes ago... so there's just going to be one chart today:

In conclusion, as I've been saying for the past several weeks, there's just nothing to do here except ride the trend -- at least until the market says not to.  I know, it gets kind of boring, but don't let boredom drive you to waste capital front-running excitement.  I will note that the rally gives some hints that it may be all or part of an extended fifth, so when it does finally end, it may do so quite abruptly.  That said, I'll reiterate that such an end could easily come quite some time from now, and at much higher prices (of course, it could always come tomorrow; we'll know it when we see it!) -- so we're not chasing a top here, we're just alert to the fact that when the warning signs finally come, we're going to pay attention and not act complacently.  Trade safe.    

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.