SPX, NDX. BKX: BKX on the Verge...

So we have two potentially interesting developments since last update. 

The first is BKX, which is finally getting close to validating the preferred count of the past 5 months (seems like FOREVER ago that I first suggested BKX rallies should be sold -- maybe longer than forever).  It has also all-but-validated the preferred near-term count from last update, and the steep relentless decline has certainly behaved in line with the predicted bear nest:

The second is NDX, which has reached a bear inflection point.  The rally since last update has, so far anyway, taken the form of three waves, which count as complete.  As long as NDX doesn't rally immediately north of 5981, then intrepid bears could treat that high as the labeled 2/B wave and short against it if they're so inclined.  If attempting such, do keep in mind that 6009 is the more critical zone, because we can't yet rule out all the potential near-term patterns that could briefly head-fake above 5981 without killing the bear case.

Finally, SPX is still the odd man out, and its pattern leaves much to interpretation.  Given the state of BKX and NDX, I'm somewhat inclined to think SPX will probably at least test the lower black trend line -- and possibly head quite a bit beyond that (the black B/2 and red Bear (A) will be the key inflection points, so if we do head lower, then bears may want to increase caution near those levels).

I really have no clear reason in SPX (by itself) to favor a near-term bearish outcome... but I'm somewhat inclined to do so anyway.

In conclusion, if bears want to try to get back in the game, NDX has reached an inflection point and the potential of a straightforward pattern.  BKX is finally close to validating a predication made five months ago, and even if it holds here, it's declined enough to mean good news for bears who've been attacking the financials on that standing recommendation. 

SPX is still a bit cryptic. The near-term pattern there can be counted as a complete ABC rally from 2446 to 2469, but leaves just enough room for doubt that I can't rule out the possibility for it to decline slightly, then rally again toward the upper black trend line, before reversing again and heading toward the lower trend line (if it ever does head to the lower trend line, of course).

Despite the tight calls, I'm still inclined to give the overall nod to bears at the moment, and suspect we'll break 2446 before we see the market above 2480 again ("before" as in "I'd sell my right leg before I'd smile at Bernanke!"  Not "before" as in "this, then this other thing immediately follows."  This verbiage has caused confusion before, so I'm hoping to head that off.).  Trade safe.

SPX, NDX, BKX: Market Throwing Some Mixed Signals

So they're keeping things interesting.

On the one hand, we have NDX, which made a new all-time-high during the last rally, but has (so far) not formed a complete-looking wave structure.  That suggests that either the recent drop was just a fourth wave in NDX, or the ATH is a b-wave. 

On the other hand, we have BKX, which rallied from its inflection point, but has since broken back below it.  And which looks increasingly like a bear nest. 

And in the middle we have SPX, which didn't quite rally high enough to meet the guidelines for a 3-3-5 flat (came very close) -- although that's not a complete death sentence for the flat (in this case we're dealing with a guideline, not a rule). 

SPX dropped sharply, but didn't break the prior low, so it hasn't locked-in a three wave rally just yet.  Accordingly, it still has a lot of options on the table, including the discussed flat, the option for a triangle (mentioned below), and other possibilities.  At this point, a sustained breakout/breakdown beyond the edges of the recent range implies some degree of follow-trough (subject to change if the pattern changes, of course.)

In conclusion, there's no overarching theme permeating the market right now.  Bears can hope that BKX is a bear nest, while bulls can hope that NDX fulfils its bullish fourth wave potential.  Whether either of those things happen, and whether either of those things will mean much to the broad market, remains to be seen.  Accordingly, this is a mixed signal market at the moment, with nothing pointing a clear way to a high-probability outcome.  That can always change in a single session, though, so we'll keep watching for additional clues.  Trade safe.

SPX and INDU: And Where Does That Leave Bears?

So bears' fumble (discussed last update) may end up costing them the game.  Bears have one out remaining, so it's not over just yet (we'll discuss that in a moment), but we're in the fourth quarter, and bears are behind by 5, so they're going to need a touchdown to win this thing.

Presuming SPX breaks 2475 (which it look likely to do this morning, but who knows for sure -- ignore the rest of this if it doesn't), the remaining out for bears would be in the form of a 3-3-5 flat.  That would have the first ABC as a larger wave (A), with the current rally in C of the larger (B), with the large (C) to follow down to new lows.  The crummy thing about 3-3-5 flats is that they are all-but impossible to anticipate in advance -- but the first step with any pattern is to at least have the awareness in advance, and that we have.

So, if SPX sustains a breakout over 2475, then it's probably headed toward 2485-90 (with 2489 being the "perfect world" target).  From there, it's entirely possible bears will turn this thing back down.  So we'll be watching for impulsive reversals to provide the next piece of that puzzle.  And that's about all that can be done with such a pattern.

INDU is in a similar position -- so we're either looking at black "alt: v" underway currently, or we'll see a similar retest of the ATH in a (B) wave:

In conclusion, bulls have continued breaking each bear warning level, while bears never broke the important bull warning level -- so we can't and shouldn't ignore that.  At this point, it's pretty clear that either we're still unwinding lower-degree fifth waves (which thus would temporarily stall the big fourth wave we anticipated), or the market is going for a larger 3-3-5 flat, to punch in that a big, time-consuming fourth wave more directly.  Trade safe.

SPX and BKX: Bears Fumble on the 3 Yard Line... but the Game's Not Over Just Yet

Well, yesterday was both good and bad for bears.  It was a great day for anyone who was trading the charts on a short-term basis, as the near-term preferred count had been anticipating a break below 2437 and the SPX cash market opened way down at 2428.  This made for an easy 22+ points of profit for anyone who sold the 2450-54 target zone and closed in the downside target zone (which, for cash traders, would have entailed taking at least partial profits directly upon the cash open). 

But the market quickly recovered, so the day ended up being a disappointment for any bears who were holding out hope for more follow-through.  This behavior forces bears to be a bit cautious going forward, because that type of price action suggests a lot of buyers were waiting in the wings (more on this later).  So if SPX sustains a breakout over next resistance (2455ish), then bears will have to behave even more cautiously, especially until the next target is reached, and/or until the market gives signs of reversing.

That said, there is still a chance that 2455 resistance will hold and that yesterday was a "one off" for bulls.  The upcoming sessions will answer that directly.

BKX is worth another look here, because it's indicating that it's reached an inflection point, but also indicating that if this inflection point fails, it is likely to fail significantly.  The preferred count remains bearish for now. 

(NOTE:  For some reason, Stockcharts is severely messing up my labels here, no matter how many times I try to fix them.  So please forgive the sloppiness of the chart.)

In conclusion, yesterday indicated lots of buyers were waiting for lower prices, and sometimes that's quite bullish.  But there are also times when buyers trip over themselves for a day, only to find that everyone who wanted to buy got in on that same day, and there are not enough buyers left after that.  As noted, the upcoming sessions are going to tell us which instance this was.  For the moment, I'm still leaning bearish on the bigger picture.  Trade safe.

SPX and INDU: Near-term Target Capture and Reverse Keeps Bears in the Game

In the prior update, we expected SPX to rally up to 2450-55 and reverse lower (technically this prediction predated the update by a day, since I mentioned it on Thursday morning in our forums).  On Friday, that's what the market did.  It looks as good as it can for bears right now, and their near-term stop levels remain clear.  In addition, the daily bar on SPX (not shown) typically hints at some degree of downside follow-through.

I'm reading the low at 2436 as a b-wave, but it's not impossible for this to be part of a triangle.  Triangles often have complex waves such as double-zigzags that can throw you off -- so just in case, I've drawn up a chart with one alternate near-term bullish bear count:

INDU has, so far, been treating the blue line as resistance.  Which is how bears would like it to remain, of course:

In conclusion, there's no material change from the past few updates.  Trade safe.

SPX Update: No Material Change

There's no change since the prior update, so we're just going to look at SPX and its near-term options.

The first thing that jumps out on the chart is that we have a decline from SPX 2454.77 that looks like it is probably incomplete.  If we presume that to be correct, then there are two main options:

1.  The low at SPX 2436 is a b-wave, which would see us rally toward 50-54 before reversing back down to break that low (including the potential for several days of up/down/up/down around those two extremes).

2.  SPX heads lower more directly, thus suggesting either a micro bear nest lower, or an ending diagonal nearing completion.  A rapid and sustained breakdown would suggest the former.

The third option, of course is that neither of these options are correct.  And that's always possible too, so I've discussed that on the chart below:

In conclusion, my near-term preference is for one of the two numbered options discussed above the chart, both of which imply an incomplete near-term decline.  If bulls pull out a near-term surprise here, then things will become a little more challenging, at least initially  And of course there's Fed Speak today, so that should keep everyone on their toes (except for Janet, who has no toes per Federal regulations).  Trade safe.

SPX and INDU: Bulls Defend Their Zone -- but Will It Hold?

In the last update, I talked about the potential ABC decline and how bulls needed to hold the zone around Friday's low to make something of that potential.  I concluded the update with the following thoughts:

if bulls are going to stick-save this monster, they probably have to do so now.  It looks probable that they will ultimately fail in that endeavor, and thus that bears still have the ball -- but nevertheless, it's a good area for bears to avoid complacency.

Yesterday, the bulls read the update, slapped their bull foreheads, and launched the rally they needed, thus doing their best to make everyone believe there was a complete ABC decline in place.  Despite that, I'm still inclined to lean toward the bears.  Either way, the best thing about this pattern now is that we have a VERY clear confirmation level to watch, along with targets that should be fairly reliable.  This is all discussed in detail on the SPX chart: 

INDU did manage the test of the blue trend line from the underside:

In conclusion, bears haven't had much luck with bear nests in recent years, but this time just might be different.  Whether it is or not, at least there is a very clear confirmation level for bears to watch (and for bulls to defend), and probable targets to aim for if/when that level fails.  Trade safe.