SPX, INDU, RUT, BKX Updates: Timing is Everything

Well, I'm pretty happy with the timing of Monday's update, and I hope my readers are too.  The warning signs I began seeing last month appear to have come to fruition, and it's hard to see yesterday's decline as anything other than a micro third wave, given how relentless it was.  On some markets, such as INDU and BKX, it may be a third wave at multiple degrees of trend, so this is a good wave to wait for clear bottom signals before attempting to get fancy and trade long against the near-term trend.

INDU's near-term chart shows how we may be inside a nest of (potentially) three first and second waves, which would make the current wave red iii of red 3 of blue 3/c.

 
BKX was warning us of problems back on April 30.  (Stockcharts is giving me grief and won't let me update this chart -- but it was labeled correctly on Monday, so there's not much to update, other than to delete the "or 2/b?"):

RUT was also warning us of potential problems a couple weeks ago:

And finally, I'm rather pleased with Monday's call for one final 4/5 unwind with a higher-high in SPX before a large reversal.  Considering other markets were already showing signs of heading lower, it wasn't the easiest call to expect a final higher-high for SPX alone:

In conclusion, the pending reversal I warned about in Monday's update showed up, and everything appears to be unfolding as suggested.  At the moment, there are no apparent signs of a bottom, and the odds are reasonable that we're only halfway through this decline.  Trade safe.

SPX Non-Update

Last update discussed the potential that one more higher-high might complete Bull 3, and while SPX fell about 4 points shy of my ideal target, we did get a higher high and a reversal, so that might be all she wrote for Bull 3, with the larger fourth wave correction I discussed now on deck. 

It is still possible for there to be one more small 4th and 5th left to unwind, but I'm not banking on that. 

I have to apologize, but we've had a lot of rain these past couple days, and my internet connection was barely functional today, so I was unable to update charts today -- but there's really not much to update, except -- as noted -- that with yesterday's new high, Bull 3 can now count as complete:

I'll attempt to do a more complete update for Thursday, internet connection willing.  Fortunately, Monday's update was pretty thorough, and the market seems to be playing along with my predictions.  Please refer back to those charts if needed.  Trade safe.

SPX, RUT, BKX, INDU: Giving the Bears Some Airtime

It appears that it's time to begin an increasing focus on the bear case, since a larger correction is likely drawing near.  SPX probably still has another fourth and fifth wave left to unwind (there's a slight chance that wave has already unwound, but that looks like the underdog right now), and thus may still make another higher-high, but the larger third wave rally we've been tracking since November appears to finally be nearing completion.

Accordingly, we're going to look mainly at bear signals that seem to be manifesting across various markets.  We'll start with the trusty SPX chart that has remained materially unchanged for the past 7 straight months:

Next, we'll look at RUT, which may be leading the way.

A larger view of RUT (continued, next page):

SPX and RUT Updates

SPX has continued trading in a very narrow range, but that may nearing resolution.  It's a bit difficult trying to sort out one wave from the next in this tight messy structure, but one possibility is discussed below.  If this count is correct, then we're getting close to a more sizeable correction -- the market in this scenario would simply be unwinding the remaining micro fourth and fifth waves before embarking on a large fourth wave correction at much higher degree.

Another option not shown above is that we're still unwinding red iv -- if that were the case, then the sideways grind would continue for another week or so (let's hope not).

RUT briefly cracked a seemingly-significant technical level, and the pattern here suggests lower prices will come (possibly after a short-lived rally):

In conclusion, SPX may wrapping up its micro fourth and fifth waves.  If that's what's underway, we may see a couple more short-lived head-fakes higher before a larger correction.  If SPX sustains trade south of 2378 more immediately, then we're probably headed to at least 2358 over the short-term.  Trade safe.

RUT Update: A Closer Look at the Intermediate Picture

Since last update, SPX made two quick trips over 2400, but each time failed to hold its gains.  So far, there's no change to the near-term options discussed in the prior update, so today I'm going to focus more on the intermediate options via RUT.

The first chart is unchanged from May 3, but the second chart will have more detail.

Here's a closer, more detailed look at the two leading potentials right now:

In conclusion, there's no change to SPX from the prior update, but I've fleshed out the leading intermediate options via RUT.  The next step for bears in RUT would be to sustain trade south of 1380.  Note there are options for a more complex diagonal than shown, but if such a move unfolds, we'll just have to take that as it comes.  Trade safe.

SPX Update: Why No One Loves Fourth Waves

In Friday's session, bulls did what they needed to for their "next step." So, although another near-term down/up sequence remains possible, the recent move adds more confidence that if there is another immediate down move, it would likely only be the C-wave of a more complex fourth wave, and thus a buy op.  Because one additional thing bulls accomplished Friday was to negate any chance that red wave-a down was a first wave -- so that gives them more of a "all-clear" that more upside is coming, either directly, or after the completion of a more complex fourth.

We're in essentially the same position in the bigger picture, since this is also a fourth/fifth wave sequence, so the position of the market is the same.  One of the reasons fourth waves can be so difficult to trade is because they tend to be complex, while at the same time sometimes giving only the most meager of hints before embarking on another complex move.

In conclusion, the options remain the same as they were last update, with more complex fourth waves possible at multiple degrees, but no real way to predict that without a bit more information from the market.  Trade safe.

SPX and RUT: Oh, the Joy

On May 1, I projected a rally to 2394 to be followed by a reversal lower to break 2382, which could then mark a complete micro 4th wave.  The projection played out well enough (stopped a bit shy of my downside label), but the structure of the entire waveform leaves much to be desired from an analytical standpoint, as it has turned into a very ugly chop zone.  There are essentially two leading potentials right now:

1.  Red wave iv completed at 2379 and it's on to new all time highs in red v (black path on the chart below).
2.  The decline to 2379 was the b-wave of an expanded flat -- which would then see the market reverse (ideally) shy of the all-time high, then decline back to test 2379, then rally back up to test the highs again, then decline AGAIN south of 2379 (blue path below).

While the all-time high can be treated as a stop, the challenge with b-wave rallies is that they can exceed the third wave peak (in this case, red iii) without invalidating the b-wave.  But playing for b-waves in a market like this can be hazardous to one's account -- so, due to the fact that the bull option for this structure is reasonably near-term bullish, though, it would be tempting fate to be short if SPX sustains a breakout over the all-time high.

RUT is interesting, inasmuch as it has now overlapped a previous high, which does hint at the potential for the previous rally to be wave B of 4.  The other option that could fit this pattern, given the position of the current wave within the overall structure, is for the peak at 1425 to mark wave i of an ending diagonal.  So, if RUT breaks over 1425, the diagonal would have to be given the benefit of the doubt (with the possibility for an even more bullish pattern).  Until then, the expanded flat (blue B and C) should be eyed with respect.

In conclusion, the market is still giving mixed signals.  It' possible that SPX red iv (first chart) completed at 2379 and we'll head straight on to new highs, but the wave structure hasn't made that clear.  Now more than ever, it's advisable to play only the edges of the current wave, until it resolves one way or the other.  Trade safe.