SPX and INDU: Test Time?

Last update, we discussed that the market's intentions were less-than-clear/questionable, and we may be about to get some answers.

It appears that SPX is considering testing the prior all-time high breakout in the upcoming sessions.  If it drops down and bulls find support there (meaning prior resistance has become support), then rallies back up and clears this week's high, that would be a positive sign for bulls.  If it drops back down and falls through, then that could be a positive sign for bears.

Of course, it's always possible it will just keep rallying immediately, but I think both bulls and bears would prefer to see a retest of that zone first, so we'll assume that's on deck for now.

Like SPX, INDU has also fallen back through its trend line breakout:

In conclusion, a retest of the prior breakout (in SPX) would be healthy.  Presuming that happens, how the market reacts at that point could provide clarity as to whether bulls are "for real" with this breakout, or if it's just been a head-fake.  Trade safe.

SPX and INDU Updates: Questionable Intentions

SPX has remained above its prior all-time high, but has not yet back-tested that zone (which would be a more true test of whether this is to be a head-fake or a lasting breakout).  If this is a true bull wave, there is of course no law that a back-test is required, but given how long the market stayed below that zone, it's not unreasonable to anticipate the potential. 

If this is a bull wave, we would expect to begin to see a stronger upside run begin soon.  The wave since the February low has been choppy and full of overlap, which is more typical of a b-wave.  If it's the bull count, then that overlap was a bull nest of first and second waves, and it needs to begin a strong upside run in a third wave.

INDU currently still remains below its all time high.

In conclusion, due to SPX breaking the all-time high, we do have to allow for the possibility that this rally is part of a meaningful bull wave -- but as yet, the pattern remains less-than convincing.  That could always change tomorrow, of course, and, conversely, bears still have little to sink their teeth into.  Thus it remains, if nothing else, a market with "questionable intentions," at least for now.  Trade safe.

SPX Update: Outlier or Head Fake?

Futures are indicating that SPX is going to gap through resistance at the open, which is probably not exactly what bears want to see.  It will of course remain to be seen if SPX can sustain that breakthrough, but as we did for much of this rally, we'll refrain from bearish front-running unless we see an impulsive decline or a solid inflection point.

I want to pause here and note that it is incredibly unusual to see a decline of the depth and strength as we had earlier in the year that is NOT followed by a second leg down.  I won't say it's "completely unheard of," but it's very, very uncommon.  As a result, it would be disingenuous if I didn't admit that I'm a bit surprised that the market has managed to (thus far, anyway) avoid any additional fallout.

But avoid additional fallout it has, so we simply have to put bearish thoughts on the back burner until we see something suggesting otherwise.  A B-wave rally is still possible here (with the second leg c-wave down still due), and unless we see this breakout increase in upward momentum, that will be a prime suspect.  However, if the breakout runs on increasing momentum, b-wave odds will likewise decrease.

I've listed some targets for the most bullish options on the updated chart below:

In conclusion, again, it's quite unusual to see a free-standing decline of the magnitude we saw in January/February without a second leg down, so bulls aren't out of the woods entirely just yet, but by the same token, bears probably want to await some confirmation before acting aggressively (yes, we're back to the same mantra I repeated most of the way up).  Trade safe.

SPX Update

As so often happens when the market reaches a major resistance zone, SPX has hit an equilibrium and turned out a sideways grind for the past few sessions.  This is fairly common to see at such times, and suggests a temporary balance between buyers and sellers.  Eventually the market will clear out one side of the trade and move in that direction for a time.

Accordingly, there's nothing to add since last update, as SPX hasn't moved much in that time:

In conclusion, there's no material change since the prior update.  Short term, I would not be surprised to see SPX test the 2868-73 zone again, and then decline from there to south of 2856.  Trade safe.

SPX and INDU Updates

So yesterday, SPX gave a perfect retest of the all-time high, then found resistance there.  INDU is still a ways away from its prior ATH.

There's nothing really to add here to the last few months of updates.  We began expecting a "complex double retrace" of the January/February mini-crash wave pretty much immediately after it ended in February, and now here we finally are.  The main question at this point is whether it will stop "here" or if it continues higher.  The red B-wave on the chart below could run higher if it wants to, even 100+ points higher... so bears probably would like to see this test hold.

INDU is in a bit different position, and also has room to run higher if it wants.

In conclusion, ideally bears would like to continue the turn that began end of day yesterday, but I'm always at least a little skeptical of "bad news" tops, so we'll see how things go.  Trade safe.

SPX Update

No material change since last update.  Due to the potential expanded flat that I warned about on August 8 (and which did ultimately pan out from slightly higher levels), there are no meaningful upside price levels in SPX until the all-time-high.  Which is interesting, inasmuch as it seems like a lot of folks have grown quite bullish here -- beneath a major resistance zone that's contained the market for half a year.

Near-term, the expanded flat means the market can rally back above 2863 if it wants and that would not gain it any technical advantages.  The all-time high is the level SPX must sustain trade and closes north of, for bulls to gain confidence.

In conclusion, trade above 2863 would reset the smaller red "bear 1/a" and "bear 2/b," but not the larger red (2)/B.  Trade north of the all time high would reset the large red (2), but not the red B (see recent expanded flat from black bull a to black bull c to understand why).  There's really not much to add here beyond that.  The wave since the April low has been a mess and hasn't really taken the form I'd like to see in terms of clarity, but since this retest of the high has been something I've anticipated since the February lows, the market has given no reason to shift stance.  Yet, anyway.  Trade safe.

SPX Update: Downside Inflection Zone Captured; Important Decision Time for the Market

It's been a solid week of hits for the updates, with Wednesday's decline capturing the broader expectations of black bull:c, which I had noted I was favoring one way or another (technically the decline fell 2 points shy of the official 2790-2800 target, but close enough for government work).

As also warned, SPX bounced strongly from that zone, and has finally now tested the 2850 upside zone, which was also something I mentioned I'd be watching for this week.  So the market is now sitting in the bounds of a pretty important inflection zone:

In conclusion, both the bull and bear counts anticipated a decline toward black bull: c, so things do get a little less easy now.  The near-term pattern on SPX leads me to suspect that we'll head in the downward direction early in the session, but it remains to be seen how bulls will react to that.  Overall, I'm slightly inclined to continue favoring the bears as long as the all-time high holds, but this is an inflection point, so stay nimble, and trade safe.