SPX, NYA, BKX: 57 Channels and There's Nothing On

On Friday, SPX broke above the previously-discussed 2429 level, which served as fair warning to bears for caution.  At this point, there is still no clear victor in the bull/bear wave count war, so it's best for bears to watch for impulsive declines before taking strong action.  I'll let the charts do the talking from here:

NYA's ABC count shown in the prior update was apparently correct:

And on the ugly side of the coin, we still have BKX lagging severely.  Either BKX is going to start rapidly making up lost bull ground, or something may be amiss under the hood that is not being reflected in the broader market yet.

In conclusion, there are still mixed signals out there, but (as yet) no clear impulsive declines in SPX, so bears need to stay on their toes.  As I wrote on May 26:

...it's a little difficult to envision a decent-sized bull wave underway here, but "difficult to envision" is hardly grounds for declaring it impossible.  It most certainly is possible.

At this point, bears will need to get something going in the reasonably near future to remain in the running.  There are roughly enough waves for a fifth wave (blue "Bear: (5)" on the SPX chart) to complete at any time, but until we see an impulsive decline, bearish thoughts remain speculative.  It will be interesting to see how SPX responds to its recent trend line breakout, and that may be the next signal to watch.  Trade safe.

SPX, BKX, NYA, NDX: Mixed Signals

So the market is still giving off mixed signals, as BKX recently broke its prior swing low, while of course SPX recently made a new all-time high.  RUT has also been underperforming; whle INDU has not broken its prior ATH, nor has NYA.  These markets are going to need to get in sync if the bulls want to stretch this rally much higher, and right now one could be forgiven for thinking the rally may be close to running out of steam for at least a little while.  Let's look at a few charts.

We'll start with SPX, which found support at both of the first two noted support points (though first support then broke after a bounce):

SPX counts well as the famed "WTF" pattern, so I went looking at other markets to see if sense could be made elsewhere.  NYA could, theoretically, count as a complete ABC decline (I've labeled it below as a bullish corrective wave, in order to show how that option would be technically feasible), but it's far from conventional, so it's entirely possible this is simply a portion of an incomplete bearish decline wave. 

About a month ago, I mentioned (on the forum) that NDX looked like it would continue rallying for the foreseeable future -- but now NDX is finally getting into territory where it may be completing five waves of rally:

Meanwhile, BKX has continued to behave like a rebellious child (unsurpringly), and has thus far refused to participate in the mandated "Everything is Awesome!" program.  It's possible that BKX will be selected for "reconditioning," where it will be strapped into a chair in a room with only a single TV screen, and forced to listen to Ben Bernanke talk about the Fed's "Tools" (although he will never use any actual first OR last names to describe the "tools" at the Fed):

In conclusion, the markets are fractured and will need to get on the same page if bulls wish to continue Happy Fun Time.  As it sits now, it still looks like we're closer to a top than to a bottom.  Trade safe.

SPX and INDU: Second Verse, Same as the First...

Friday was an exciting day in the market, if you like days that are great for a round of golf and/or spearfishing.  Virtually nothing happened price-wise, as SPX compressed itself into a tighter and tighter range, apparently in the hopes of vanishing into a singularity of its own creation.  Since then, the only thing that's happened event-wise is that the Fed's Kaplan came out and said that "some correction" in stocks could be healthy (translation: the Fed might start trying to talk the market down).

The Fed does this every so often, in an effort to appear responsible to the average citizen, and so they later have "plausible deniability" when everyone starts complaining about market bubbles. 

"Remember?  We tried to warn investors about that bubble!" the Fed will say, with a completely straight face, "It's not like WE have any control over what people do with our free money!  Sheesh."

So maybe this is part of the precursor to the larger fourth wave we're currently on alert for.  Due to the market's "can't do" attitude on Friday, there's not much to add today except minor updates to the charts.  First up is the intermediate picture:

A few minor additions to the near-term chart:

And a quick INDU chart, mainly because it's interesting that INDU hasn't yet broken its all-time-high.  Technically, this pattern starting at blue 1/a wouldn't be a TRUE abc, but I sometimes prefer such labeling for ease of reader comprehension:

In conclusion, essentially nothing happened on Friday, so there's no change from the prior update, and I'm still more inclined to think the top is probably closer than the bottom -- but there is still no decent-sized impulsive decline on the chart, so it's not impossible for the rally to run a bit longer first.  Trade safe.

SPX Update

Yesterday, SPX cleared the ATH and ran to the next target zone of 2415-20.  This has at least helped clear out a couple options, but this remains a difficult market to anticipate due to the noise pattern that preceded the current wave.  Sometimes you can look at a pattern and make a clear call with Elliott Wave -- such as back in November 2016, when the call to 2400 SPX was clear because the pattern was clean.  Sometimes, you can instead discuss probabilities.  And other times, all you can really do is discuss possibilities -- but even this has value, because it is often still able to identify potential turning points, which allows one to avoid things such as going stubbornly long right before a possible top and vice-versa.

Due to the preceding noise pattern, we're bordering on the "discuss possibilities" zone, so let's start with a wide-angle view of the two leading options:

Moving in for a closer look, we find that the if/then equations of the past week have been helpful, since last Friday I suggested that a breakout over 2383 would lead to 2400, then noted that a breakout over 2406 would lead to 2415-20.  Since both of those targets were captured, that amounts to having the trend direction correct for 29 of the last 35 SPX points the market has traveled. 

(Note: typical typo -- "2315-20" should be "2415-20")

In conclusion, it's a little difficult to envision a decent-sized bull wave underway here, but "difficult to envision" is hardly grounds for declaring it impossible.  It most certainly is possible.  Interestingly, RUT and BKX are still well below their respective swing highs, and both of those markets continue to look relatively weak compared to SPX.  The question at this point is how much SPX can rally before, say, BKX needs to pay the piper and halts SPX's advance.  From an analytical standpoint, the problem with it being so far below its swing high is that it leaves a lot of room. 

I feel I have to default to the B-wave rally here, but there are no clear stop levels until we see our first impulsive move lower (which gives us the high preceding the impulse to act against), although first resistance is the current price zone (which was previously a target), so it's possible the rally will stall here.  Trade safe.

RUT, BKX, and SPX Updates:

Back in December of 2016, the Russell 2000 (RUT) hit a high of 1392, and from there it began its valiant journey to where it now sits -- more than six long months later -- about 12 points lower.  To call this year a "sideways grind" is an understatement.  The trouble with patterns like this is that the more complex they become, the more options for resolution open up.  And the more options open up, the harder it becomes to figure out which is the "real" option. 

There appear to be three waves into the high at 1425, and while that means it's probably a corrective b-wave high and thus likely to be bested at some point, it also means we have certain expectations for resolution of that pattern in the form of a decline.  Specifically, we would normally expect an impulsive c-wave decline, which breaks the low that began the b-wave (1335).  That hasn't happened yet.

But before we balance all our baskets on one egg, we have to realize that this is where things become difficult due to the preceding chop -- because there's no law that says RUT can't form an even more complex wave BEFORE that anticipated impulsive c-wave manifests.  In other words, it could even rally up to break 1425, then drop back down to 1335 -- or, and this is where it gets really fun (sarcasm), it could form several such waves, strung together over another few months, before we get resolution. 

Of course, there are more straightforward possibilities as well, and since those options better lend themselves to being charted (WITHOUT taking the radical step of hiring a blind crack addict with epilepsy to draw the lines), those are the options I'm showing below:

Since bulls currently have four green days to the bears' two red days in SPX, that means we are now contractually obligated to at least discuss a more bullish near-term possibility on the BKX chart.  This isn't a "done deal" projection or anything, because BKX has still only retraced about half the prior decline -- so the more directly bearish resolution shown previously is still alive and well and this is not intended to "overwrite" that option.  But I've already charted and shown that option previously, and it's essentially unchanged, so the chart below is for awareness sake:

Yesterday, SPX made good on Friday's call that a sustained break above 2383 would lead to 2400.  Now it's do or die time for bears, at least as far as a potential second wave goes.  Much like RUT, SPX has many options here for continued head-fakes and sideways yuck. 

We do at least have to realize that from a technical standpoint, a sustained breakout over the ATH could be a third wave headed significantly higher -- so at least be aware that's a technical possibility in the event the rally continues past the ATH.  And if you're a bear, then protect yourself accordingly. If the ATH breaks, then remember that you do not HAVE to take on risk, especially if you're uncertain what's unfolding -- cash is a position too. 

In conclusion, if bears want to keep the second wave option alive, then they need to make a stand directly.  This rally is not outside the realm of technical possibility for a bear wave, so all hope is not yet lost, and at least the obvious stop level for shorts is reasonably close.  The garbage end of the deal is that a breakout over the ATH won't guarantee a rally, due to B-wave potential, but it does open up the possibility of a strong rally, so that would make a breakout hard to trade, at least until there is a small impulsive decline to indicate a stop zone.  In the meantime, of course, bears still have the shot of stopping the rally here.  Trade safe. 

SPX Update: Through a Glass Darkly

Well, Friday's rally probably ran a bit too deep for a fourth wave, so either we're looking at a second wave rally, or we're dealing with the bull alternate count.  I still have a hard time seeing BKX making a new high from here, and it looks like it probably needs another leg down, but BKX is significantly below its prior swing high, which means it could rally without making a new high even if SPX were to do so.

Given the position of the market, I think today's update is best served with one simple, yet detailed, chart of SPX:

In conclusion, bulls have put up more of a fight than I think many of us expected, and appear to have tacked on an extended fifth to Friday's rally just for confusion's sake.  While this is hardly the clearest wave in history, the SPX chart above nevertheless valiantly attempts to outline the options in detail.  Presently, there appear to be three waves off the low, so if bears can make a stand here, then this could mark a complete ABC rally.  Trade safe.

SPX and INDU Updates: Near-term Level to Watch

I don't typically do Thursday updates, but I felt I owed my readers one after Wednesday's "non-update" (especially since this is potentially an important moment for the market), so if you missed that update because you don't check the blog on Thursdays, please refer to it here.  Today's update will be something of a continuation of that update and will only focus on the near-term, since the bigger picture across multiple markets was covered in considerable detail yesterday.

So, let's start off with a slight update to the INDU chart (I am doing a "slight" update to this chart because Stockcharts won't let me do anything else without DELETING all my prior annotations!)

Yesterday, this was the only specific near-term chart I published, and INDU bounced directly off the red iii I had placed on this chart.  It then proceeded to exceed the iv label I'd placed, but no invalidation levels were cracked on that rally, so it still fits just fine as a potential fourth.

Since I couldn't use Stockcharts to move the iv label to its appropriate location, I had to do that in Photoshop (!).  (Thanks for wasting my time, Stockcharts!)  The red iii label is still exactly where it was yesterday.

For SPX, I did a brand-new chart (thank you again, Stockcharts!).  On this chart, I've included the bull count that might fit this pattern.  I'm not favoring that count, but it pays to be aware of the alternate options.  I've also outlined the next important near-term level (2383), and what to watch in the event SPX were to sustain a breakout beyond it.

In conclusion, there isn't much to add to yesterday's reasonably-thorough update, except for a bull count just in case the market is doing something unexpected.  I will remain near-term bearish here unless SPX sustains a breakout over 2383, or until there are signs of a more significant bottom.  Trade safe.