SPX and RUT Updates

Last update noted that we were giving the edge to bulls, and SPX indeed made a new all-time high from there.  It's been chopping around a lot since then, so we have to at least consider the possibility the blue wave 4 may be becoming more complex and could still be unfolding.  I've noted that possibility on the chart below:

We haven't looked at RUT in a couple weeks, and since last update, RUT has validated its preferred count.  This current rally has the look of an extended fifth in RUT.  Extended fifths tend to be absolutely relentless while they're underway, then they reverse abruptly and sharply.  But they do typically offer at least one retest of the prior high after that first sharp reversal, so if that occurs, we should have a chance to catch up with the reversal on its first strong bounce.

In conclusion, there's still nothing that's particularly bearish about the charts.  SPX could take a short-term detour if it wants, but presently we'd expect that to simply be part of a correction.  Trade safe.

SPX Update, and Some Fundamentals at a Glance

The last two updates suggested SPX would probably test the 2490 zone, and in the most recent update I stated:

I will throw my hat in the ring and say that I do suspect Friday's low will be broken in reasonably short order, because it looks very much like a B-wave. 

Friday's low was broken, and SPX headed to the 2490 zone (2488 to be exact).  From there, it bounced relatively strongly.  Right now, that bounce up has only been three waves, so it's not out of the realm of possibility that SPX will turn back down from here.  If the bull wave count is unfolding, then there aren't enough waves up in place yet, so we probably have to lean toward the idea that the market will hold that low and head higher -- particularly if SPX sustains trade north of 2504.  But that's not a given yet, due to the potential of black "alt B" and "alt C" on the chart below.

So, while I've noted the bull count is currently an incomplete structure, if the bear count is underway, then the current rally is instead already a complete structure.  So although I'm leaning toward the bulls, bears still have an out:  If the 2488 low fails, then we'll have to give serious consideration to the bear count.

I'd also like to share a fundamental chart that I found interesting.  The chart below show the SPX in comparison to Durable Goods Orders.  As we can see on the chart, the two have correlated almost perfectly over the past quarter-century -- up until recently, that is. 

Ever since the 2015 correction ended, SPX has continued to rally strongly, while durable goods orders have remained range-bound.  There are no other examples of this happening anywhere else on the chart, so how long this situation can continue is anyone's guess.  (It's already gone on for about a year and a half.)  But it does suggest that valuations are probably a bit too frothy, and this might fit with our expectations that a larger fourth wave correction is relatively close.

Interestingly, it was just announced that durable goods orders jumped 1.7% in August, so I suppose it's possible for durable goods to start catching up with SPX.  As I mentioned, there are no other examples similar to the recent past, so we don't have a precedent to draw from.  But I found the chart interesting either way.

In conclusion, SPX tested the expected 2490 zone, and has (so far) bounced from that zone.  As long as bulls continue to hold that low, then we probably have to give them the edge, if for no other reason than the simple fact that it's a bull market, so they don't seem to lose many of these battles.  But in the event SPX sustains a breakdown at 2488, then we'll have to shift the edge to bears for the near-term.  Trade safe.

SPX Update, and a Few Words on the Fed

Well, as we all know, last week Janet Yellen announced that's she's actually Janet Reno in disguise, and that the Fed will finally begin to attempt to unwind its paltry $4.5 trillion balance sheet, starting in October.  This weekend, Janet Reno/Yellen discussed a few additional details on the unwind, giving us a glimpse into what the Fed will be rolling off first. 

In order, below is Janet's list of the "first items to go":

1.  The Fed will begin by unloading an undisclosed percentage of its massive Beanie Baby collection, which it began purchasing in the 90's as a stop-gap to the Great Beanie Baby Collapse.  The program was originally intended to simply bail out a handful of banks who were overweight in the previously-skyrocketing Beanie Baby Sector, but it eventually expanded to include some of the largest private collectors, including Ben Bernanke.  Expect to see Beanie Babies regularly appearing for auction on the Fed's eBay account ("TheFerReal-USFed-ReserveYo").

2.  In December, the Fed plans to let a number of assets mature and roll off by simply not reinvesting with Bernie Madoff.

3.  In 2018, the Fed will be selling off William Shatner's kidney stone, which they purchased as part of QE 2 and have been holding in a special humidity-controlled vault ever since.  The vault alone has been costing taxpayers nearly $2.8 billion per month, so this is a bigger step than it looks at first glance.

Janet ReYellen stated that she's confident they can find at least a few other areas to "trim the Fed's fat" as time goes on, and she may possibly even consider parting with the Fed's original cut of Andy Warhol's Empire.

In other news, the market continues to trade.  As has become tradition for Friday sessions, this most recent Friday session was held on a Friday -- so that meant there were options expiring somewhere in the Universe, which meant that the market wasn't allowed to do anything other than grind around in a circle, as if it were Miley Cyrus and she had just lost an eye.

Accordingly, there's not a ton to add to last Friday's update, except to note the reaction to the lower red trend line that was already on the chart:

In conclusion, there's not much to add to the prior update, but I will throw my hat in the ring and say that I do suspect Friday's low will be broken in reasonably short order, because it looks very much like a B-wave.  That may simply end up being wave C of blue 4, but there's always a chance it will turn out to be something more significant.  Of course if we sustain a breakout over the all-time-high instead, then it's possible the most recent correction was a double zigzag (I have that as an alternate possibility instead of the B-wave).  Trade safe.

SPX Update: Where a Banker Can Be a Banker...

We're just going to focus on the SPX chart today, since hopefully "everything we need to know" is on that chart.  There is a little bit of doubt in that regard, because this is not a terribly clean wave structure, but we'll try our best to work with what the market has given us.  Thus the seemingly-important levels are outlined on the chart below:

Frankly, I hope the market bounces north of 2480 to keep things straightforward, because none of us particularly want to see yet another expanded flat C-wave.  Why?  You may ask, especially if you're a bear.  Well, because C-waves are impulsive.  And if we get an impulsive decline, all the bears are going to want to view that as wave A/1 down, and thus hope for another big leg down -- because there will indeed be an off-chance that an impulsive decline from here would be not the end of the correction, but the start of a new one.

But it probably wouldn't be the start of a new one, because odds would favor it as a C-wave.  Yet all bears know that "odds were made to be beaten!" so they'll keep wanting to short it all the way up... but SPX will actually be on its way to 22,967.55, and bears will end up holding the bag again.

Not that I'm cynical, here in our 8th year at Fed HappyFunLand, Where a Banker Can Be a Banker.

Anyway, what was I saying?

In conclusion, bulls hold the edge unless and until the noted levels are broken.  If those levels are violated, then we do need to stay aware that the goofy unorthodox nature of the preceding pattern is still going to keep everyone on their toes.  I, for one, am really looking forward to the resolution of the current wave.  Trade safe.

SPX and Long-term Oil Update

Still no change in equities, so we have to continue presuming the bull count unless and until the bear count shows signs of life and gives us a reason not to.  It would do that by forming an impulsive decline.

From a big-picture standpoint, Crude Earl has been pretty uneventful for a while now, which actually fits the idea of a fourth wave.  Back in June of 2016, I noted that a fourth wave at this degree could "unfold over the course of a year or so," so this continued sideways grind isn't terribly surprising.

I'm updating the Oil chart because it looks like we're in the throes of red "or (2)" (from June of this year).  Blue c (not shown on the chart) of red "or (2)" looks like it may be unfolding as an ending diagonal, so I figured it might be helpful to readers to get a rough idea of how that would look (if that is indeed what's unfolding, anyway).  Thus I sketched that into the chart.

Hard to believe, but this is currently my oldest continuously-running chart that's had no material changes since I first published it.  It celebrated its sixth-year anniversary this month (!).  Long-time readers already know it was September 9, 2011 when I first publicly predicted that oil had topped, and turned, and was headed to 25.  And yes, I will toot my own horn about that until the day I die.  Like you wouldn't!

In conclusion, there's still nothing to add regarding equities.  Oil may be in the process of completing red (2), but if that is indeed taking the form of a diagonal, then it might still take a few weeks.  And of course, be aware that in the event oil sustained a breakout over 56, then we would have to consider the possibility of "alt. bull: C."  Trade safe.

SPX and RUT: The Stuff of Nightmares

SPX made another new all-time-high on Friday, and has continued to keep its options open.  Again, as long as it continues holding support and there are no impulsive declines, the bull count has to be preferred -- so I've added details for the straightforward iteration of that count to the chart below (adding details to a standing bull count is sometimes the cue for the market to roll over -- just a head's up):

A few readers have requested an update to the Russell 2000 (RUT), so here's my best-guess on this one.  The thing with RUT is that there are complex patterns, there are very complex patterns, and then there are patterns that are the stuff of nightmares.  RUT's current chart is the type of thing that would be shown on an endless loop in a technical analyst torture chamber.

In conclusion, until we see an impulsive decline or see some support levels fail, there's just not much for bears to hang their hats on yet, so we have to presume the trend remains up for the time being.  Trade safe.

SPX Update: Keeping Things Short and Sour

Or is that "sweet and sour"? 

Short and sweet!  That's what it is, I think.

Nothing much happened since last update, and yet we're able to eliminate at least one potential pattern from the mix.  The reasoning for this is discussed on the chart below:

We're just going to limit it to that one chart today, because one is enough in a market like this.

Beyond the notes regarding the diagonal, there's pretty much nothing to add to last update, since SPX has traded in a tight range since then.  Hopefully more to add in the next update!  Until then, trade safe.