SPX Update: Inflection Point

Last update discussed the possibility of a top nearby, but with two caveats (quoted below):

1.  "The main question now will be an option that I raised on our forums on Monday, and that's for a more complex "double retrace" correction prior to the next leg down." 

2.  "On the one hand, I like the idea of the market trapping bulls near yesterday's high before embarking on a more serious decline, but on the other, I'm never a fan of "bad news" market tops and vastly prefer significant tops to occur on "no news" or good news.  Consequently, I'm only slightly favoring the blue path over the black path."

It's worth noting that the e-mini S&P futures (symbol: ES) will have completed that discussed double-retrace, although this isn't entirely apparent on the cash charts.  In a perfect world, today's open is where bears will make a stand.  If they can't, then we have to consider the possibility that we run toward the Blue C target more directly:

(PLEASE NOTE TYPO:  2990 should read as 2790!)

In conclusion, a gap up open that reverses soon thereafter would be exactly what bears want to see here.  If we instead "gap and go" (keep running strongly), then bears will want to be cautious, as such a move could signal a run toward 2825-60.  Trade safe.

SPX Update: The Perfect Storm?

Monday's preferred market path (as shown in blue on the 15-minute chart) expected that the market would open lower, but reverse that opening to run up toward SPX 2720-30 before reversing lower again.  The first two projected moves were a hit (although SPX ran a hair higher than 2730), and given the "surprise" announcement of Cohn's resignation and the subsequent futures reaction, it appears the third stage of that prediction may come to pass as well, though there are two routes the market can take to get there.

The main question now will be an option that I raised on our forums on Monday, and that's for a more complex "double retrace" correction prior to the next leg down.  That option is shown in black on the chart below:

On the one hand, I like the idea of the market trapping bulls near yesterday's high before embarking on a more serious decline, but on the other, I'm never a fan of "bad news" market tops and vastly prefer significant tops to occur on "no news" or good news.  Consequently, I'm only slightly favoring the blue path over the black path.

But I am still slightly favoring the blue path, because between Trump's tariffs (which seem likely to drag on the economy, IMO, and will certainly suck liquidity out of it either way) and Powell's brazen unwillingness to intervene and backstop this market (which, while potentially painful, will be exactly what the market needs -- a move away from the interventionist policies of the past 10 years and the current bubble), it seems as if the market is facing a possible "Perfect Storm."  Interesting that the charts saw this potential storm brewing back in January.  As I've said for many years:  The charts LEAD the news.

In conclusion, barring the possible "double retrace" rally noted on the first chart, there's no material change from the prior update. Trade safe.

SPX Update: Bears in Control Again?

Last update noted that the rally had stalled at the inflection zone, and I wrote that "downside risk has begun to outweigh upside potential."  That turned out to be true, as SPX dropped roughly another 100 points from there.

The market seems to have formed an impulsive decline, so we probably have to presume at least one more impulsive decline is still forthcoming, although we might see a bounce in the interim:

On the chart above, I'm allowing for the possibility of a more complex correction prior to C/3 kicking off for real -- but currently both preferred paths are pointed lower.  One ends at a retest of the low, while the other continues to new lows.  New highs from here much be viewed as an underdog at present.

Bigger picture is unchanged from a month ago (though I've adjusted the C/3 targets by about 10 points):

In conclusion, while there are a few more complex patterns that could show up here, we'll simply have to try to adjust to those in real-time if/when they show up.  Barring that, we should probably treat this as if 3/C has already begun, or at least as if a retest of the zone near the mini-crash low is on deck.  In both cases, it appears the market is still pointed lower.  Trade safe.

INDU Update: Rally Stalls at Inflection Zone

Just a brief update today.

Last update warned that if the Dow Jones Industrial Average (INDU) reached 25,700-800, that zone would have the potential to stall the rally, and stall the rally it did.  Interestingly, the news media is blaming the stall on "JeRoman Emperor" Powell's testimony -- yet somehow the charts knew that price zone could be trouble before his testimony had even been given.

As I've said for years, the charts lead the news, not the other way around.

Whether this stall will prove to be more lasting or a temporary hiccup is unclear yet.  But either way, the charts do suggest that downside risk is now on the border of outweighing upside potential.

\
In conclusion, the market has reached its first upside inflection zone, and downside risk has begun to outweigh upside potential.  Trade safe.

SPX and INDU: Radioactive Waste from Chernobyl

Last update, I mentioned:

...the near-term pattern has been more fun than a barrel of radioactive waste from Chernobyl, so I'm including a few notes on the S&P 500's (SPX) near-term pattern.

I've stared at this chart long enough to give myself a headache, but I still have a difficult time finding a count that suits the very beginning of this wave to my satisfaction.  My best guess is that it's a nested bearish 1-2 pattern off the 2754 high -- but if it continues to chop around (which it very well may), then it will be possible that the expected resolution lower would culminate with a c-wave instead of a third wave.

The "best guess" bear nest will be dead if 2755 is broken -- but on the bright side, the rally to 2747 was not at all unexpected, and ended directly inside the red target oval, so that much shouldn't have been terribly troublesome for bears. 

I also said that I suspected the near-term pattern would culminate with lower prices -- on that much, the jury is still out.  It's possible the pattern is a complex expanded flat, represented by black (B) and (C) on the chart below.  That pattern is by no means guaranteed, it's simply something to remain alert to.

The bigger picture INDU chart is materially unchanged.  Since the first day I published this chart (near the lows), red B/2 has been the "all roads lead to Rome" target, so we've suspected we were headed higher one way or another -- it may simply turn out that "higher" comes sooner rather than later.

In conclusion, there is the potential for the near-term pattern to get screwy again, so remain alert to the possibility of black (B) and (C) -- but that type of pattern is almost impossible to predict, so don't bet the farm on it.  The market may instead continue heading toward its B/2 target more or less unabated.   Trade safe.

SPX and INDU: No Material Change

There's no material change from the prior update -- but the near-term pattern has been more fun than a barrel of radioactive waste from Chernobyl, so I'm including a few notes on the S&P 500's (SPX) near-term pattern.

I've stared at this chart long enough to give myself a headache, but I still have a difficult time finding a count that suits the very beginning of this wave to my satisfaction.  My best guess is that it's a nested bearish 1-2 pattern off the 2754 high -- but if it continues to chop around (which it very well may), then it will be possible that the expected resolution lower would culminate with a c-wave instead of a third wave.  Either way, I suspect this pattern is not complete yet.

Bigger picture, there's no change to the most recent update:

In conclusion, while there's no change to the big picture, the near-term pattern has left itself the option to turn into a chop zone.  I've only chosen to represent the two near-term options that seem the most likely, but the mess heading into today has certainly left other options still on the table.  The only thing that seems clear about the pattern is that it's probably not complete at yesterday's low, so immediate, significant new highs from here seem unlikely.  Trade safe.

Late Big Picture Update -- Crash Now or Crash Later?

This update is much, much later than I intended.  I overslept due to perpetual exhaustion.  I did this chart Tuesday night, and intended to publish it earlier -- but since it prefaces the big picture, a few folks on the forum have requested I publish it anyway.

This is INDU, but SPX should follow a similar count.  If this count is correct, that is.

My best guess is that we're going to retest the zone around the mini-crash low at some point in the upcoming sessions.  If bulls are lucky, we'll bounce from there in a large c-wave, to complete ALL OF B/2 before the real fun starts (for bears).  This is speculation based on how the market has performed during past similar moves -- there is really nothing in the chart that can allow me to predict such a move though.

So, please be aware of this next point...

The most bearish option is that B/2 is entirely complete already, in which case we're headed toward the mid 2400's (on SPX) next.  Because there are potentially three complete rally waves, this option is technically viable.  I'm guessing that fate will intercede and make this a large flat (blue path -- again, purely based on past similar moves).  But please remain cognizant that if fate does not intercede on behalf of bulls, then we're already in C/3 -- and third waves are crash waves. 

In other words: a crash, more or less directly from here, is entirely within the realm of possibility.  Sustained trade south of the A/1 low could be absolutely devastating to the market.

The most bullish option is that we're still heading higher, directly toward red B/2.  Bulls of course need to reclaim the most recent swing high to give them any hope of that option.

In conclusion, I suspect we're headed toward blue "(b)?" on the chart above, one way or another.  If and when we get there (assuming), then we'll have to try to determine if the blue "(c)?" rally is going to come to the rescue of bulls or not.  If it does not, then this market is likely very close to embarking on a crash wave.

Incidentally, there is a near-term bull option where we could rally all the way back up to 2745-54 (with 2752 as the "perfect world" target) before heading lower again.  If that were to occur, then shorts against 2755ish would be a pretty solid risk/reward.  But that's definitely NOT trading advice -- please consult your broker, your lawyer, and possibly even your Aunt Matilda before doing anything in the market, because there is always the risk of significant loss of capital. Trade safe.