SPX Update: On the Edge of Oblivion

The most useful chart in the prior update was the trend line chart, so let's lead with that.  I've added the most immediately bearish near-term count to that chart, and the micro 3rd wave target zone:

Bigger picture, if the larger red (2) is complete, that would put us on the edge of a nested third wave (the third of a third), which is typically fast and brutal:

In conclusion, if we're about to kick off a nested third wave decline, then surprises will be to the downside.  I don't even attempt to counter-trend trade on nested third wave declines, because indicators get maxed out and fail repeatedly.  Bulls primary hope still seems to be for a more complex second wave.  Short of that, this type of count can turn into a waterfall decline.  Trade safe.

SPX and INDU Updates: Ugly Now or Ugly Later?

No material change from the past few updates.  SPX topped in the red "a?" zone -- there are enough waves for an entirely complete correction, if that's what the market wants.  If it wants a more complex correction, one possible route is to retest the low and then bounce.

If that was ALL OF wave (2) at yesterday's high, then things could get very nasty next week.

Here's a simple trend line chart:

I've noted the potential head and shoulders on INDU:

In conclusion, this has been a solid week.  We spotted the potential for a large bounce at the start of the week, and there are now enough waves up for a complete correction.  The preferred count continues to expect that this will culminate with new 2018 lows, possible significantly new lows -- this is presumed to be a large C-wave, and sometimes Elliotticians are known to say that the "C" stands for "Crash."  In the meantime, the main question is whether the current correction wants to become more complex, or decline more directly.  Trade safe.

SPX and BKX: No Material Change

In Monday's update, I warned bears several times to tread carefully and that a second wave bounce was possible.  Yesterday those warnings paid off, as the market uncoiled itself relentlessly higher.  We have some interesting patterns in development now, with the decline from the all-time high having an (apparent) micro extended fifth, and the current rally likewise having an (apparent) micro extended fifth.

This is the potential recipe for some sharp up and down action over the coming sessions.  Given what's in the charts right now, this would ultimately be expected to resolve lower over the longer-term.  Narrowing down the timing will be helped by seeing if the market forms an impulsive rally or an ABC rally for this current leg.  Right now, it's 3 waves up (ABC), and may even need higher prices before being a COMPLETE ABC.

We'll track that as it unfolds.

In the meantime, BKX is peeking over the edge of a cliff.  If bulls can miraculously stick-save this, then the picture could change, but as it sits, it is what it is.

    
On the SPX chart, the red "a?" and "b?" should be considered as speculative at the moment and will probably need to be adjusted later.

In conclusion, the market seems to have confirmed Monday's read that wave (1) down was complete.  This means that if/when (we're currently assuming "when") there's a significant breakdown at last week's low, we could get a serious and significant decline.  I'd also like to throw out there that the bull count isn't entirely out of the question -- but we're going to continue to treat it as the underdog for the time being.  Near-term, we will likely continue to see sharp price action.  There are now two micro extended fifths on the board, which could mean at least two double-retraces pending.  Again, we'll track that as it unfolds.  Trade safe.

SPX and INDU Updates: Inflection Point

While studying charts this weekend, I discovered a very interesting support confluence, which INDU tagged perfectly on last week's decline.  Coupled with the price action on Friday, this tells us that bears probably want to be cautious here -- because all that means this is an inflection point where the market could reverse higher.

Long-term, this is something of a no-man's land... if the larger wave c of B ended, then we'd ultimately expect the 2018 lows broken -- but that doesn't mean the market can't bounce around for several weeks first.  Especially if last week's decline had an extended fifth wave (which I believe it did) and extended fifths are notorious for being followed by complex corrections.

Near-term, if this is part of a larger expanded flat C wave down, then wave (1) of C may have completed last week.  I've also added a bull count that we can't rule out (an ending diagonal for c of the larger B):

In conclusion, unless and until INDU/SPX can sustain breakdowns of their noted support zones, I think bears want to tread carefully.  If wave (1) down has completed, then a vicious 2nd wave bounce may be forthcoming.  Of course, if SPX instead sustains a breakdown, we'd have to presume the current wave is still unfolding.  Fortunately, we do seem to have a relatively clear dividing line to work with.  Trade safe.

SPX, INDU, BKX: Finally

I started warning on October 5 that the trend might be changing, and noted that

...yesterday's low appears to be critical for bulls, as it's the dividing line between a complete ABC decline, and an impulsive decline that would suggest a larger trend change.

We broke that low, and at that point assumed the trend had changed to down.  On Monday, I discussed that we would head forward under the assumption that the trend had indeed changed, and that it was even possible we were ultimately headed for a big decline.

Then on Wednesday, I gave two near-term targets:

If B/2 completed yesterday, then we would expect SPX to head toward a first target in the mid-2820's, with a shot at a second target in the mid-2780's.

And SPX closed the session at 2785, which is about as good an outcome as any prognosticator can ever hope to achieve.  I also (again) noted that it was possible ALL OF the long-anticipated B-wave had completed at the recent all-time high, meaning we were ultimately headed into the 2500's.  Given the "mini-crash" nature of the decline so far, I think that's the assumption we have to operate on.  The charts seem to agree, with BKX showing a pattern that rarely bottoms immediately (on an intermediate basis -- this does not preclude near-term bottoms of course):

INDU was always the "tell" for me, and its pattern at the 2018 low is the reason I clung to the B-wave as the preferred count even after SPX hit new all-time highs:

The "textbook" target for SPX would actually be in the low 2400's.  I can't promise we'll get there, of course, but that would be the "usual" expectation.  The last leg of the current decline was clearly an extended fifth, so I'm curious if SPX will mount a larger rally here.  With extended fifths, it's hard to tell sometimes, as the wave can just keep stacking extension upon extension and decline relentlessly:

In conclusion, the price action suggests we have indeed entered the long-anticipated C-wave decline.  C waves are sometimes called "crash" waves, so bulls should maintain extreme caution until there are signs of a meaningful bottom.  Trade safe.

SPX Update: Still Looks Good for Bears

No change from the last update:  It still appears bears have control for now.  That can always change, of course, but for the moment it appears the most reasonable question is whether bulls can muster a bit more of a reaction bounce before the next leg down kicks off.  There are enough waves for a complete corrective rally already, if the market wants:

In conclusion, bears continue to hold the edge for now.  If B/2 completed yesterday, then we would expect SPX to head toward a first target in the mid-2820's, with a shot at a second target in the mid-2780's.  Those target levels would change (higher) if SPX manages to bounce higher for a more complex corrective B/2.  Continue to keep in mind that in the event the much larger B-wave completed at the recent all-time-high (still uncertain), then SPX is ultimately headed toward the low 2500's before it's said and done.  Trade safe.

SPX Update: Bears Get a New Shot

On Friday, we discussed what was needed for an impulsive decline, and I drew a black "4?" and "5?" on the chart where the market would be likely to turn IF it was going to form an impulse down.  SPX opened higher, hit the black "4" label and reversed lower, then made a beeline for the black "5?" label -- and then bounced.

This thus gives bears the most hopeful-looking pattern they've had in weeks.  While it's always possible the decline is wave C of an expanded flat, that presently appears to be an underdog, so we'll treat this as a likely trend change, at least in relative terms.

The big question is whether the larger B wave completed at 2941.  If that's the case, we would expect the 2018 lows to be revisited before this decline completes.  That's a little ahead of the game right now, though, so we'll take it one step at a time.  In other words, for the moment, we will presume that the market probably needs at least one more similar-sized wave down before bulls get a decent shot at turning things -- and we'll remain aware that it's possible for this to turn into a much larger decline.  Trade safe.