SPX, NDX, BKX, INDU: Bears Need to Make a Stand

Well, it may be something of a near-term do-or-die moment for bears today/tomorrow, so we're going to get right to the charts.  Let's start with SPX, for reasons which will become apparent after you read the annotation:

INDU looks like a b-wave into the recent low, so I'd prefer not to see INDU sustain a breakout over the all-time high.  It could break that zone briefly and then return back down to break the purported b-wave low, but be aware that a break of the ATH would cast doubt on the remainder of the blue path.  And a sustained breakout would cast doubt on the b-wave, too, though frankly I'd be a bit surprised if that's anything other than a b-wave.

BKX's pattern remains legitimate for the moment.  Here again, a break of the ATH would invalidate the "2" but not the B -- it's just really hard to trade anything on the hopes of an expanded flat B-wave, at least until you see an impulsive reversal at the minimum.

NDX has plenty of room to run and remain below the ATH... and my very first instinct when we broke the red A/1 low was for the black "Flat C" option -- so we'll see how this shakes out:

In conclusion, bears probably need to see a reversal today/tomorrow to keep their near-term hopes intact here, otherwise the market has some room to run.  As a side note, I'm really looking forward to the markets getting back in sync one way or another, because the patterns across markets are still "all over the place," which makes the near-term incredibly difficult to predict.  Trade safe.

SPX and NDX: Turn Down the Noise

This remains a difficult market to predict, but I'm still holding out hope for the expanded flat red wave ii in NDX.  If that's the pattern in NDX, then (in a perfect world) NDX would rally up to 5684-5757, then reverse and head back down to break the most recent low.  Of course, this overall market is hardly the market we would expect in a perfect world.  At least, it's not the market I would choose for my personal perfect world, but maybe somebody else would; to each his own, I suppose.

SPX has, so far, held the bull/bear line in the sand (2405), so there's no new information out of this index:

In conclusion, SPX is a giant noise zone going back to June, so until it breaks out of the edges, it's going to be nothing but noise in the interim.  NDX has at least been reasonably predictable prior to this point, but it's worth mentioning that while the option of a "completed decline" looks less probable, it's not impossible -- and that's a change from the beginning of last week (it looked virtually impossible, pattern-wise, at the beginning of the week -- and NDX did then make lower lows).  In any case, there's really no new information from the market since Friday, so there's really nothing new to add to (or subtract from) the prior update.  Trade safe.

SPX, RUT, INDU, NDX: Bulls Running Out of Real Estate

This market has been a near-term challenge lately -- to say the least -- but our intermediate "tell," which we established on June 16 (RUT), has remained bearish throughout all the noise:

We've also been on the right side with NDX, as we caught the last 230 points of decline, then have continued to note (since the target capture) that "no sustainable bottom is in place yet."

INDU was, if nothing else, at least quite orderly since the last update, responding as if on cue to each noted price zone:

SPX remains the most challenging pattern, though that could change soon:

In conclusion, RUT and NDX have kept us looking lower on an intermediate basis, and the overall market is still giving us reasons to hold to a "bearish until proven otherwise" stance.  If not for all the bear-pattern blow-ups of the past few years, I would be unabashedly bearish with what I'm seeing currently... but as it sits, I'm still a bit gun-shy until the following condition is met:  If SPX sustains a breakdown at the red line on the chart above, that would eliminate the (lower case) abc option and open up significant bear potentials, in the form of a large bearish nest of 1's and 2's.  Bull's main hope (if there's a breakdown) would be for an ending diagonal, but even that would not bottom immediately.  Just remember it's never a good idea to get too bearish this close to support -- some signals suggest it will fail, but in the end, either it breaks or it doesn't.  Trade safe.

SPX, INDU, NDX: Fractured Markets is Right

"Fractured Markets" was apparently the correct title for the last update.  Bulls may not realize it just yet, but the overall market has grown an order of magnitude more complex in recent months.  In the past, bulls could count on everything rallying together, but that has not been the case lately.  And that means there isn't enough liquidity right now to rally everything at once -- so it may be an early warning shot to bulls. 

On Monday, INDU made new highs, but NDX made new lows.  This could be viewed as the proverbial "flight to quality" and away from beta -- if that trend continues, it would suggest a "risk-off" mentality has entered into the market. 

Given that many markets have been trading in a range-bound noise zone for some time -- which all by itself makes charting quite difficult -- this fracturing of markets is going to make things that much more difficult for the time being.  All of this does suggest, however, that the larger fourth wave we're on alert for may be drawing increasingly closer (and may even have already begun in some indices).

Let's look at INDU first, because it does appear to have the cleanest pattern, and two price zones to watch:

The move in NDX could still grow more complex:

SPX is a complete mess, but there are a couple price zones to keep an eye on here.  Unfortunately, with all the noise of the past few months, those zones can't guarantee anything, but they're all we've got at the moment.  I haven't charted the bear nest option on this particular chart, but if this is a bear nest, then things will likely get very ugly on any sustained breakdowns below 2405.

In conclusion, it still appears likely that NDX has not formed a sustainable bottom yet, but (as we saw on Monday), that may not be relevant to INDU or SPX.  With the choppy overlapping noise zones we've been enduring of late, this is a very difficult spot from which to attempt near-term predictions, so for near-term clues, about the best we can do is watch the zones discussed above.  Trade safe.

INDU and NDX: Fractured Markets -- Again

Today is (normally) a light-volume (pre) holiday session, and traditionally, such days are often bullish.  The simple reason for this is because the large institutions know they can't sell much into a light volume day, because they're liable to tank whatever issues they're selling, so these types of sessions tend to be bullish essentially by default.

In the prior update, I discussed the pattern in NDX and why I felt that pattern made it unlikely that an intermediate bottom was in place.  I've finally got StockCharts up and running again (sort of -- it still deletes my old annotations sometimes, which is incredibly annoying), and that allowed me to peruse my chart book again.  In so doing, I have to acknowledge that while an intermediate bottom looks unlikely for NDX, it's not out of the realm of possibility for certain other indices, such as INDU (below):

INDU is also not nearly as far below its ATH as NDX (or SPX for that matter), so it's certainly possible that INDU will rally over its ATH to complete a fifth wave while NDX corrects in a large expanded flat.

First things first, of course, and both INDU and NDX need to clear the peaks of their prior swing highs before bulls can get too excited.  But that shouldn't matter much to bears, as NDX and SPX both captured their first downside target zones for nice profits, so there's no need to push questionable patterns at the moment -- one can afford patience (and one's account often CANNOT afford impatience), and get back in when things look clean again.

In conclusion, I think one of the things leaning me toward the expanded flat in NDX is the fact that if that's a bear nest instead of an abc decline, then it's quite bearish -- maybe too bearish?  One other possibility that I haven't discussed it that of an ending diagonal C wave, wherein the black "Flat: B" label would be wave i of said diagonal, with the current rally being ii -- in that event, NDX would head lower fairly directly, but not massively lower.  We'll burn that bridge if and when we come to it, though.  As I mentioned last update, an expanded flat isn't really "predictable" ahead of time, but for now (anyway), my instinct, at least, is for the black expanded flat, which would mean we continue to rally for the near-term.  If we pull a steep downward reversal in the coming sessions and form a bearish daily candle, then my instinct is probably incorrect.

I hope everyone has a happy fourth of July -- trade, and be, safe.

SPX and NDX: First Downside Targets Captured -- What Next?

(First off, still having issue with StockCharts, so I updated the most recent charts.)

This market has remained difficult to trade (and predict), so in the last update, I suggested a trading strategy as follows:

At this point, the worst case scenario for anyone who's been trading these charts is that they now have profits to protect.  And there's something to be said for protecting some of those profits in a market environment that has been incredibly hostile to bears for the past 8 years.  For me, I plan on protecting about 50% with trailing stops, while letting the other 50% ride with stops near my entries (for now, anyway).

Using that strategy, one got stopped for a small (but still decent) profit on 50% of NDX shorts (during Wednesday's rally), then captured about 230 points of profit on (most of) the remaining 50% of NDX shorts yesterday when the first downside target zone was captured.  Considering how difficult this market has been, I'm not complaining about how that trade worked out.

The thing is, it may continue to be difficult for a time.  First off, the "good" news:  In all likelihood, there is no intermediate bottom in place yet.  I say this because, in NDX particularly, the recent decline from 5845 is almost-certainly three waves.  Five waves are "required" for a decline in this position to complete the move, not the three we have (this is why we can surmise that the bottom isn't in yet).  Linear thinking leads one to conclude the decline will continue directly, but that's not necessarily the case, as we'll see on the chart below. 

Given how complex this move has been so far, it's entirely possible it intends to get even more complex -- so I've shown that option below, in red:

If NDX instead bounces a bit today and/or Monday, but remains below 5757, then turns and drops through yesterday's low -- well, in that event, then we might see things get nasty immediately.  We'll see how it goes -- the green trend line is first meaningful resistance.

SPX has similar options, and also captured (by a hair) its first downside target zone:

In conclusion, we can say with some degree of confidence that it is unlikely a meaningful bottom is in place yet... however, the market might still have more tricks up its sleeve.  The thing is, it's simply impossible to predict at this point whether the move will become more complex (as shown in red on NDX) or be straightforward -- the best we can do is remain aware of the possibility, and view it as a short op (against the all-time high) if it materializes.  If we keep heading lower directly, then we'd have to at least consider the possibility that the market is building a massive bear nest, which could lead to a breakaway decline on a breakdown at yesterday's low.  Trade safe.

SPX, NDX, RUT: Good Problems to Have

Okay, first off, I'm having a ton of trouble with StockCharts tonight, so I'm going to use different software for today's charts because I'm tired of wasting time and my wife is undoubtedly tired of listening to me yell at the computer (hopefully, this is only for this update and things will work on Friday!  The software, not the yelling.).  We'll also look at a chart from Friday's update, sans new price action. 

But first, let's recap the past couple weeks, because it especially helps newer reader to understand my communication style.  (While I'm not above yelling at my computer, I virtually never "yell" in my updates.)

On June 16, I wrote:

This is somewhat akin to the way I felt back in 2015 shortly before the flash-crash -- when many technicians were suggesting a nested third wave rally was about to launch to the moon, but I was calling a top.  We're in a similar position now.

On June 21, I wrote:

Equities are in a position where bears can take the wheel if they're so inclined, but no indices have given bearish confirmations just yet.  That said, INDU does look very toppy on a near-term basis, so unless/until bulls can reclaim the ATH there, I'm inclined to lean bearish on even the major indices, at least for the near-term. 

(On our private forums that morning (where I'm often more bold, since I can warn members in real-time if I realize I'm wrong) I added to that comment and told everyone: "this is as good as it gets for bears.")

By Friday, I felt everything was finally coming together, and thus was pretty forthright:

In conclusion, as I've been discussing recently, a number of markets appeared to have been aligning -- and now finally appear to be aligned in a way that makes a bearish move quite possible over the coming sessions.  If RUT, BKX, and NDX have all topped (or nearly so), then there is in fact potential for us to be on the cusp of a fairly significant downdraft.  So as long as bulls don't pull a surprise breakout from these patterns, it makes the most sense to continue to lean bearish and simply "trade what you see" (as they say).

(As a long-time forum member (Dundies) pointed out on our forum, that is about as "hardcore" as I ever get directionally.) 

Then on Monday, I added (regarding SPX):

Price has overlapped the start of the prior breakout, and normally that isn't particularly bullish, so I would probably have to be a seller on any retest of the all-time high.

SPX then presented a perfect entry for anyone who was bearishly inclined as it did indeed retest the all-time high -- before turning and dropping 30+ points.

This has been an incredibly challenging market to chart, because markets have been moving in a very piecemeal fashion.  There have been no "obvious" topping patterns, nor have various markets had the good graces to align and move together for the sake of clarity.  This is evidenced by the way I've had to chart each market quite differently -- calling tops in some (RUT and BKX particularly), while allowing SPX a little room to run even after I first called the BKX/RUT tops.

Forgive me for a bit of horn-tooting, but my worst fear is always steering my readers wrong, so it's been a huge relief for me to watch each individual market top and reverse directly from the specific price zone I'd noted for each individual market.

1.  BKX topped last week directly at the "red resistance zone" I'd highlighted repeatedly;
2.  NDX topped Tuesday in the 2nd price target/reversal zone in Friday's update (5845-56);
3.  RUT reversed yesterday from the price zone I mentioned on June 22 (1420-24), and has remained below the larger "we'll remain bearish below" level since I first published it on June 16;
4.  And when I finally talked about SPX again (last update), it reversed on a the retest of the ATH, where I said I'd have to be a seller.

Considering the diversity of these indices (and the patterns therein), that's some pretty darn fine chart work, if I do say so myself.  Anyone can use mechanical system to identify things like "Hindenburg Omens," but locating specific price reversal zones on four completely different markets, and hitting all four of them, is something else entirely.

At this point, the worst case scenario for anyone who's been trading these charts is that they now have profits to protect.  And there's something to be said for protecting some of those profits in a market environment that has been incredibly hostile to bears for the past 8 years.  For me, I plan on protecting about 50% with trailing stops, while letting the other 50% ride with stops near my entries (for now, anyway) -- because as we'll see in a moment, there's potential for this move to be significant, but that's not guaranteed (nothing in the market ever is), so balance is in order.

So, at this point, the questions are:  Where are we now and what next?  Let's start with RUT, and we're going to use Friday's chart, since I can't get StockCharts to update with the current price action.  More comments below the chart:

RUT did manage the trip to 1420-24, and then reversed.  By all indications, RUT appears to be headed to 1375-80 -- the main question is whether it wants to form a more complex sideways grind first.  For now, we'll assume it's headed lower fairly directly, because there are enough waves in place for it to do so.  Bears would like to see it sustain a breakdown at 96 to help confirm the targets, but if it does:  Beyond 75-80 and the next target is the zone near the lower blue boundary of the diagonal.  In a perfect world, it will ultimately head to the targets discussed on June 16, but bears have to stay cautious, especially as (and if) it head lower, because there's no law that says the diagonal can't add another wave, as long as it stays below 1442. 

And, of course, nobody wants to ride drawdown from 1377 to 1442, which is why we protect some of our profits along the way.

NDX is testing its prior low, and has already provided 70+ points of profit for anyone who shorted the second reversal zone (or 50+ points for anyone who shorted the first zone; 60ish for anyone who averaged):

SPX does remain a bit challenging from an intermediate standpoint, because there are two diametrically opposed ways to view the recent all-time high, and I haven't decided which is more appropriate.  Given the bearish look of other indices, it's probably the bear option, but I can't be 100% just yet:

In conclusion, the bearish reversals I predicted happened across the board.  From here, we'd next like to see NDX sustain a breakdown at its prior low to help rule out screwy bull moves (8 years of watching bear patterns blow up gives bears no choice but to stay on their toes at all times).  I can't help but be gun-shy after 8 years of conditioning, and being gun-shy has allowed me to escape many countertrend trades with profits -- but everything does look as promising as it possibly can for bears at this stage.  But the bottom line is, NOBODY should lose a red cent from here -- the only question is whether we'll walk away with a little bit of profit, or a lot.  And that's a good problem to have.  Trade safe.