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Friday, August 4, 2017

SPX, INDU, RUT: Market Fracture Continues


INDU has continued its relentless rally, it's now through Target 1 and headed toward T2.  Meanwhile, the rest of the market has been about as orderly as a preschool fire drill.  Everything seems to want to do its own thing, with RUT dropping straight down as INDU rallies straight up -- while BKX, SPX, et al, have been range trading.  I haven't seen a market this uncertain of its identity in a long time, and I still feel that suggests we're getting close to unraveling that larger fourth wave, because (as I've mentioned before), it suggests that there isn't enough liquidity around to rally everything at once.

And further, since INDU is rallying while RUT is falling, it implies there's been at least a near-term "risk off" mentality prevailing.


I don't feel like I can be a huge help on RUT at this exact moment, because this is a very unusual pattern, but folks have been asking for an update, so here it is.  It is possible 5 completed at its "minimum requirement," as discussed on July 26:


SPX is either an ultra-rare triple zigzag higher for a bearish wave 2/b (this has to be considered the underdog, simply because it's such a rare pattern), or it's not done heading higher (has to be the favorite, for that same reason):


In conclusion, I haven't seen a market this confused since the last time I attended an Andy Warhol auction.  But -- as I discussed on July 28 and 31 -- it still appears that some markets have further upside left, while bears may have seized, or be close to seizing, some degree of control in others.  Trade safe.

Wednesday, August 2, 2017

SPX, INDU, NDX: A Few Random Thoughts About Countertrend Trading


I'll get to the random thoughts mentioned in the title after the SPX chart.  But first, INDU is in the process of capturing its first target from July 14, but has given no signs (so far, anyway) that it's going to stop there, so Target 2 stays on the table unless/until we see an impulsive reversal:



Bulls have continued holding their key price level in SPX:


NDX still looks like the bears' best hope at the moment... but -- and sometimes I assume this type of thing goes without saying -- I would advise only fantastic entries if one is bearishly inclined. 

Bears need to realize that the trend is still up, and has been for a long time, so they are (obviously) trading against the prevailing trend -- and countertrend traders do NOT get the benefit of recovering from marginal entries.  When one is trading with the trend, the market will eventually bail out every entry, no matter how bad -- but this is not the case for a countertrend trader.  Countertrend traders can be left stranded for weeks, months, years... or even forever (if anyone is dumb and/or stubborn enough to hold a losing position through that level of drawdown, anyway). 

Keep all that in mind whenever we talk about bear options.  Until we actually enter a bona-fide bear market, bears have to stay twice as smart, twice as nimble, and twice as discerning about their entries as bulls.

For an example of what I'm talking about, look at the SPX chart above.  Back in June, somebody was buying at 2453.  That was a horrible entry, and the market immediately reversed lower.  If they were decent traders, they probably wouldn't have been buying that level in the first place, so we'll assume they were stubborn enough to continue holding through 50 points of drawdown.  Nevertheless, despite their awful entry and their ill-advised stubborn approach, because they were trading with the trend, the market eventually rallied back up past their entry and bailed them out with a profit. 

Eventually, that will change, and bulls will be punished for such actions.  There's a reason for the old adage: "Don't confuse brains with a bull market."  But, really, that's not any of our concern -- our concern is protecting and growing our own capital, not wasting energy being bitter toward bad traders who may be profiting despite themselves.  So, all that should matter to us is our own actions, and our own awareness of what's smart for our accounts.  And it's smart to know the prevailing trend, and thus know whether you have a wide margin of error, or a very narrow margin of error -- and then to behave accordingly.



In conclusion, INDU has captured T1 and may be heading toward T2.  SPX has held the key bull level so far.  NDX looks like a market where bears may get a chance, but if it sustains a break over the 5933 level, then bears are probably best off waiting for a much better entry, in which case (in the event of a sustained breakout) that chance may come near the "or 2/B" level.  Trade safe.

Monday, July 31, 2017

SPX, INDU, BKX, NDX: INDU Approaching Next Target Zone

Last update, we talked about how bears may be getting close to finally having their day in the sun, and it does appear we're getting closer. 

INDU is now very close to its first upside target zone:


BKX has continued to struggle with the noted B/2 resistance zone for a while now:



Bulls have thus far held the bull/bear dividing line on SPX, so we may be headed to the upside target next (jury is still out for the moment as to whether they'll be more downside first or not, but as discussed last update, we still have a potentially-complete ABC decline at 2459 unless/until bears prove otherwise):


And NDX may have a bit more upside over the near-term, but does look more like an impulsive decline from the ATH than a corrective decline... so a retest of the ATH would present a relatively low-risk short opportunity -- with a tight stop, of course (not trading advice!):


In conclusion, we're ahead of the game here, and that can be dangerous if one has the wrong mindset in a market like this -- but it still seems that it's not unreasonable to continue to believe that we're closing in on completion of a fifth wave.  Just keep in mind that "tops take time," so it's possible it will draw out a bit longer than bears want it to -- and, as of this moment anyway, we're still looking for a bit higher prices in at least a few places before it's all said and done, so there's probably no rush just yet.  Trade safe.

Friday, July 28, 2017

SPX and NDX: Bears Get a Shot


Yesterday saw the first signs in a while that bears haven't all died and gone to Yellowstone.  As of yet, we don't quite have an impulsive decline in SPX, though.  And even if we get one, we won't immediately be able to rule it out as wave C of an expanded flat -- but a breakdown at the key level noted below (2458) would certainly call for bull caution.  And it might even give bears the encouragement to take a crack against the ATH on any decent subsequent bounce.  If yesterday's low holds, then we have no impulsive decline and simply have an ABC down, of course, in which case SPX would likely hit the target zone next:


NDX, on the other hand, DOES look like an impulsive decline.  I can't entirely rule out an impulsive c-wave for a flat, but either way, I have to give bears the near-term edge here as long as 5996 high holds.


In conclusion, it's always possible bulls will pull out a stick save -- but we're finally seeing some signals that suggest that at least the near-term power may have shifted, or be about to shift, back to the bears.  Trade safe.

Wednesday, July 26, 2017

SPX, INDU, RUT: My Favorite Market


Anybody remember the show My Favorite Martian?  It was actually a bit before my time, but they were still showing reruns when I was a kid.  I ask because lately I've been getting the theme song stuck in my head whenever I try to chart this market -- because this is certainly My Favorite Market.

Here, try it... read the titles below as "My Favorite Market," then add the theme song... and, voila (French, literally: "aaargh!"), you'll suffer from the same brain-debilitating mental garbage that I'm currently enduring!  (Sorry! Yet somehow the song feels strangely appropriate to this market.)



Anyway, moving on to the charts for My Favorite Market, SPX at least, seems to be on track for the next target zone:



INDU still has its options open -- but at this stage, if it sustains trade above the ATH, such a move might then suggest that it's going to skip the red "c?" option.



Bigger picture INDU is unchanged:


RUT has required yet another look, since it finally broke out over the key 1442 level.  I'm still not willing to call this whole chop zone of the past few months a bull nest, though -- so the most reasonable option (with the diagonal dead) is an expanding triangle fourth wave.  And the subwaves fit that pattern:


In conclusion, this has continued to be the most difficult market we've seen in years, in my opinion.  I would continue to advise bears to avoid front-running this pattern, and await an impulsive decline before committing to any strong action.  Trade safe. 

Tuesday, July 25, 2017

And Now Back to Our Regularly Scheduled Programming...


Just a brief post to let readers know that my fever has finally broken, so updates will resume their normal schedule on Wednesday.  Many thanks to those of you who sent well-wishes! 

Wednesday, July 19, 2017

BKX and INDU: Markets Still Fractured


The only thing worse than this market is my current sinus infection, so I'm going to keep today's update brief.  There really isn't much to add, but the BKX chart is worth an update:


INDU has left the b-c option alive.  I'm not updating anything on this chart, because when I try to, StockCharts deletes everything -- so it's only been auto-updated with the price action:


In conclusion, this market's been harder to trade than a heavily-used Beenie Baby lately, because there is a serious fracture occurring across markets.  This suggests that there is not enough liquidity available to pump everything higher at once, and this does represent a noteworthy character change from the past few years, during which virtually all indices rallied together.  If this trend continues, it may add a bit of weight to the idea that the market is in the fifth wave preceding a decent correction.  Trade safe.