SPX and BKX Updates

Let's get right into the charts today, starting with the SPX intermediate chart.  On the chart below, it's important to note the back-test of the red trend channel.  Bears need the market to fall back into that channel and sustain trade and closes to really get anything going.  Bears beware any trip below the channel that is relatively short-lived, though.

Near-term the rally was rejected by the 50% Fib retracement, but will have a shot today at claiming that level.  The next near-term targets are noted:

BKX has the appearance of a market that may continue correcting for a while, though since this is presumed to be a larger-degree 4th wave, it can grind traders up if it wants to:

In conclusion, my conviction on SPX's next move remains marginal, while BKX does look like it wants to continue correcting.  Near-term bearish bets on BKX are off if it sustains a breakout over the presumed wave iii high, of course.  Trade safe.

SPX Update: Downside Targets Captured

There is at least one material change from last update... in the last update, I didn't feel at all confident that the decline was over, and it turned out it wasn't.  Now at least I feel it has the chance to be over.  I'm still not certain if it will form a b-up and c-down, but it could at least be complete as the entire 4th wave if it wants to.  A bit more detail and some possible resistance zones on the chart below:

If this turns into a more complex fourth wave, then we'd be alert for a trip toward the lower red "4?" after a bounce completes.  Note the perfect back-test of the old red channel:

In conclusion, the decline has now cleanly captured the targets I drew on March 3, so if this is the entire fourth wave, then we've likely seen the bottom and will head toward blue Bull: 3 next.  The downside target capture is notable in the sense that the market has shown a lot of strength prior to this decline (and strong markets often FAIL to reach downside targets), so if the market starts to struggle with the upside resistance zones, then do at least stay alert to potential for a more complex fourth, and a trip toward the second red 4 on the intermediate chart.    Trade safe.

SPX and RUT Updates

Last update, I stated that I was inclined to think we'd see further downside, which has since happened.  Although we're in the zone of the first "red 4" label on the IT SPX chart, it's not clear to me whether or not the downside is complete at larger time frames, and the near-term pattern has turned into a choppy mess.

I would at least note that this is being counted as a fourth wave, and confusing patterns are the norm for fourths -- so don't be surprised if this chop continues for a while.  For example, we could see a near-term rally followed by another leg down, and the market could thus extend the move sideways/down for even several weeks if it wants to.  I can't predict that from the market's current position, but that potential needs to be kept in mind.  Since we tend to "want" the market to move in a more linear fashion, it's human nature to anticipate quick resolution -- especially after the fast linear rally we just came out of.  I'm simply warning that "quick resolution" does not have to be the case here.

SPX reached the zone near the first red 4 from last update, so it's always possible that's it for the downside, but I do think it's prudent to at least be aware of the potential for a confusing chop zone to develop.  

RUT looks like a B-wave into the recent 1414 high, which would make the current decline a corrective C-wave.  RUT has already reached its minimum downside expectations, and I've noted the red trend line as the next zone to watch if the downside continues:

In conclusion, in the last update, more downside looked likely, and we got that -- but now it's currently unclear if that will be all she wrote for the entire correction, or if it's going to become more complex by adding another wave up and another wave down.  Hopefully the next few sessions will help answer that question.  Trade safe.

SPX Update: The Market as a Quantum Probability

Quantum physics tells us that particles don't exist prior to observation.  Instead what exists is a wave of probabilities as to where the particle might be found (note that this is not a wave of probabilities as to where the particle actually "is" -- the particle simply does not exist in any real sense until you observe it!)

Sometimes I think of the market in similar terms, as a "wave of probabilities."  In a way, that's all it can ever be.  Nothing is guaranteed -- although some patterns do seem to exhibit a form of causal determinism (often, once a certain portion of a fractal forms, the market seems compelled to complete that fractal).  The challenge is that the market can sometimes go for decent stretches without forming such deterministic patterns in the first place.  In those instances when no deterministic pattern is unfolding (at least insofar as this: even if the entire market IS causally determined, we can't always pinpoint the prior move (the "cause") -- so from a practical standpoint, we would still consider those patterns nondeterministic), which constitute the majority of market moves, then we are dealing solely with probabilities.

I think one of the errors folks, especially less experienced traders, sometimes make when attempting to apply Elliott Wave (and other systems) is in thinking that EVERY pattern is, or "should be," a clear manifestation of causal determinism -- so they believe they know exactly what's coming next.  If one takes that view, then it leads to overtrading, over-commitment of capital, and/or frustration when things aren't clear-cut.  It's always best to remember to allow for contingent possibilities, and to thus view the market more in a quantum framework than in a Newtonian framework. 

Short-term, the probabilities seem to favor at least one more leg down.  Though my first inclination is that we'll follow the blue path and bounce around a bit first, it is technically possible that b completed on Friday.

Bigger picture, the probabilities still seem to favor that the bull market isn't over yet:

In conclusion, there was little movement on Friday, so there's no material change from the prior update.  I'm still inclined to think we'll see another leg down, but this rally has surprised me before.  Trade safe.

SPX and BKX: November Targets Captured

Well, November's 2400 target was finally captured, good for about 200 points of profit.  Amazingly, it was captured to the point -- and shortly thereafter, SPX suddenly dropped like a rock.  Bears undoubtedly want to know if we're "there" yet, and the chances are that no, we're probably not.  However, a decent near-term correction can't be ruled out.  I'll let the charts take it from here:

A closer look at SPX:

And an update to BKX, which has also captured its first November target zone.  Here again, we can see that the waveform would look better with at least one more 4 and 5... possibly more (from a larger perspective):

In conclusion, SPX and BKX have both captured intermediate target zones, and the market reacted.  We could see a near-term correction now, but odds are good that the bull market is still underway in the bigger picture.  That said, we'll keep an open mind to all options for the moment, and do our best to react appropriately if the market dictates that we need to.  Trade safe.

SPX Update: Rally Continues on Important Hair Ban

No material change from last update, except to add a few notes:  It appears wave (4) was indeed complete, and the current wave does seem to be subdividing.  The near-term chart below contains the details, along with the addition of Target 2:

Whoops, wrong chart!  Here's the chart I thought I was posting:

Long-term, there's still no change, which, although boring, is a good thing because it means there have been no big surprises for my readers:

In conclusion, it appears the market rally will continue due to the recent "Nice Hair" ban, which is as good an explanation as any that the major media outlets ever offer.  I would have said it's rallying because we're in a third wave and that's what third waves do... but what do I know.  In any case, for Pete's sake, do something to screw up your hair before you get hauled off to jail.  Trade safe.

SPX Update: Market Pulls a Little "Gotcha!"

We just saw an interesting near-term pattern unfold, one which often fools both novice and experienced Elliotticians alike.  What I believe we just saw is shown below, and it often confuses people because the fifth wave did not exceed the b-wave highs, although it did exceed the third wave high, which is all it's "required" to do:

The question is whether blue (4) is complete yet or not.  If it is, then we're likely only about half-way through blue (5), so we would be looking at 2379-83 as the next target.  If the rally stalls here and reverses, then blue (4) may become more complex.  In the event 2353 fails, then we'd watch the 2343-48 zone for a potential (4) bottom.  Do be aware that since this is a fourth wave at higher degree, it can run lower than that zone if it wants, and the invalidation levels for a fourth wave is way down near 2300.

I've added a few more numbers to the long-term chart, just on the most recent subdivision of the current rally, mainly for perspective.  Lately, waves have been acting a bit funny, so I'm not saying this is "fer sure THE count, man!" -- it's merely the most obvious way to count the waves currently, so it's more a "working" count for perspective purposes.

In conclusion, we don't have any glaring wave patterns indicating a reversal yet, and the longer-term trend remains up.  We could certainly see a more complex fourth wave unfold, however -- but that's not predictable at present, so we'll simply have to react in real-time if it occurs.  Trade safe.