SPX and COMPQ Updates

I have to admit, although Friday's market didn't rally a few more points (as I'd hoped) for a cleaner retest of the high prior to dropping, I'm still rather proud of the call.  It's one thing for the people who call tops every other day, but I've stayed consistently bullish for months, then shifted my stance at the perfect moment.  Can't do that perfectly every single time, but I did this time, and I do hope these last few months have been quite profitable for my readers.

We're going to get right to the charts.  A reader asked about my long-term outlook recently, and it is unchanged (for the moment -- I sometimes balk at overly-long-term projections, because the market is such a dynamic environment):

Near-term, the big question is whether wave iv is entirely complete, or if it's going to become more complex and drop back down to break Friday's low once before rallying for real:

In conclusion, there's no change, and I still suspect we're in a "blow-off top" extended fifth wave (that's what extended fifth waves do).  Trade safe.

SPX Update: Extended Fifth Target from October 4 Captured

Back on October 4, I wrote the following:

Last update noted that it appeared the rally still had farther to run, and that SPX was inching its way toward its upside target zone.  Yesterday, that target zone was captured.

So now the question becomes "is it close to being finished?"  And the answer is:  It looks like it still has some fourth and fifth wave unwinds yet to do, so it's probably not entirely over yet.  And given the structure of the entire wave, there is a genuine possibility of an extended fifth wave, so bears are going to want to be careful until the market declares that extended fifth wave potential is off the table.

The chart included with that update noted that an extended fifth would target 2650-60 (and even emphasized that target was "not a typo").  Yesterday we got there.  This allows the possibility that the rally is over for the time being.  SPX also seems to have formed a small impulsive turn off the all-time-high, suggesting at least one more leg down is due after the next bounce.  Given these two facts, a retest of the zone just below the all-time high (which there's a chance we'll see today) could mark the best opportunity bears have seen in a long time.

Below is a closer look at the near-term:

In conclusion, a retest of the zone near the all-time high presents the potential of an opportunity for bears, but if we sustain a breakout over the all-time high, then we could see an extension of the extension, and bears should get out of the way.  Trade safe.

SPX Update: Next Upside Target Captured

Outside of one missed call for the possibility of a more complex near-term correction, we've been on the right side of this market for the past two and a half months, and I'm quite pleased about that, because this has been a very strong rally that no trader wants to be on the wrong side of.

Last update suggested we should presume that bulls had the ball on all time frames unless proven otherwise, and that worked out well as SPX captured its next upside target zone:

Bigger picture, I've been convinced that we're in an extended fifth wave, and I mentioned a few times that we could actually see the rally accelerate in its later stages, which is exactly what has happened:

In conclusion, the nice thing about extended fifths (presuming that's what this is) is that they are "blow off" moves, so the rally should be fast and furious while it lasts... but more importantly, they provide fairly reliable retracements afterwards.  So we should see an abrupt end when this does end, but we'll likely get one good retest of the prevailing all-time-high before it gets too serious about a reversal.  Thus, we'll just hang with the trend until it ends.  Trade safe.

SPX Update

I hope everyone had a pleasant Thanksgiving.  Personally, I gave thanks for the wonderful near-term mess in SPX, because if there's anything I love, it's an untradeable mess.

As you may have gathered, the above sarcasm means that there's no real change in SPX.  Lately it seems the market only rallies when it's closed (via futures), which is the same thing it did around (though after) Thanksgiving 2011.  This is actually something it's does periodically, and I have mentioned it a few times in the past, mainly because it always feels like "cheating" to me.  The leverage in the ES futures market allows one to push the market around at a fraction of the total market cap of the cash market -- so one firm all by itself can (and sometimes does) push futures to wherever they want them for the cash open.

But that's the nature of the game, so it does no good lamenting such things.  It is what it is.

Anyway, no news that's fit to print on SPX.  While the pattern was clear for a good 6 weeks or so (wherein I kept repeating "higher prices still to come"), it's currently a bit muddled, and may remain so for the very near-term.

One thing worth noting is that the 24 hour SPX chart, which contains the action of the futures market, does have the look of an ending diagonal or bull nest.  If we see a quick overthrow of the upper trend line of the blue diagonal, followed by a solid whipsaw, we could see a near-term decline follow.  Conversely, if we break out the diagonal and begin to run, then we could put in a solid upside move (as this would suggest a bull nest). 

It's also possible that the diagonal (if that's what it is) has already completed -- if the black trend line is the upper boundary; in which case watch for a breakdown at the lower trend line.

Something to be aware of anyway:

In conclusion, there's no real change from the prior update, but we do have a near-term pattern that may be worth keeping an eye on.  Trade safe.

SPX and INDU Updates

This market has been quite a bit more fun than riding in a one-horse open sleigh when you're soaking wet and it's -40 degrees out.  And your horse is rabid.  And your sleigh is made of razor wire.  And you're being pursued by Evil Elves who have Janet Yellen's face on their otherwise-normal little elven bodies.  And they're wielding rocket launchers.

Last update noted that the prior decline was an impulse, and caveated that it could be an expanded flat c-wave -- and of course it was an expanded flat c-wave.  Then SPX went on to best the all-time-high.  And now it has answered exactly nothing, because the discussed (B) wave is still possible, but it's also possible that we're already in red 3 (which was the prior alternate count).  The only plus is that I believed from the beginning that the last dip was corrective, and at least now we know for a fact that this was correct.  I guess, to be fair on myself, I did warn repeatedly that the prior chop zone made the near-term increasingly difficult to predict -- but I'm still bugged.

It's interesting to note that INDU managed to work off its severe overbought condition without giving up much in the way of price.  As I indicated in October, when a market gets that overbought, it's actually a fairly reliable and bullish signal that continued upside will follow the next correction.  It will be interesting to see if INDU mirrors its behavior from a year ago in this regard:

In conclusion, the question we all want answered is:  How do we tell now if this is a (B) wave, or if we're already in red 3 and headed toward the next targets?  The only real answer is that bulls probably need to see some fairly immediate follow-through.  Frankly, there's almost nothing harder than trying to predict an expanded flat B-wave -- so this either is or it isn't, and the market simply has to lead from here. 

Either way, Happy Thanksgiving to all my readers!  Trade safe.

SPX and RUT

So we have an interesting battle shaping up in the market.  Traditionally, the week of Thanksgiving is one of the most bullish weeks of the entire year.  But SPX appears to have formed an impulse down from 2590 -- so unless that's the c-wave of an expanded flat, it suggests another wave down is pending:

A couple readers have asked for an update on RUT, but the recent decline in RUT is "uncountable," so I don't have a strong opinion on whether it's complete or not.  It is worth noting that the black trend channel is what arrested the decline, so if that fails, it would probably suggest some downside follow-through:

In conclusion, the most recent decline from 2590 SPX was almost certainly impulsive, so that suggests another leg down will follow the next bounce.  Countering that is the fact that Thanksgiving week is traditionally very bullish -- along with the alternate bull count for a completed correction at 2557.  Nevertheless, I can only "trade what I see," and what I see is an impulsive decline from 2590 to 2578, and nothing concrete to make me doubt that.  Thus bulls need to claim 2591 to trump the apparent impulse and its suggestion of another wave down.  Trade safe.

SPX and INDU Updates

Last update, I was so certain that we'd rally up north of 2586 SPX that I drew that path on the SPX chart and the INDU chart -- and then, just to keep us on our toes, SPX dipped briefly below 2566 before rallying up into the B/(2) target zone.  I cannot even begin to express how difficult it becomes to predict a market that has made as much noise as this one, so please keep that in mind when we look at the projections below.

Let's start with INDU:

SPX would be expected to behave in a similar fashion:

In conclusion:  The bull alternate on both charts is that the decline/correction is entirely complete and we'll head straight on to new highs from here in a decent third wave.  I'm not favoring that -- if we were to make a new high, my first suspicion would be that it's still a B-wave (a second wave would be off the table).  So I'm still inclined to think we need at least one more wave down to complete this pattern -- and possibly more than one.

The biggest challenge is determining exactly WHAT this mess is trying to correct.  Due to the noise leading into the all-time-high, we may be correcting a higher degree wave than the conservative (C)/3 projection shown on the chart.  It's simply not clear, and we'll just have to take it as it comes.  Trade safe.