SPX Update: Bull Fake Out?

Thursday saw the first downside target from the update captured (black line), and Friday saw the next target captured (gap fill)... the market then bounced hard.  This is typical for bear market rallies, as the fastest rallies on the planet are short-covering rallies.

I'm torn on whether the low is a complete ending diagonal (near term bullish) or a b-wave (lower prices still needed directly) and I'm leaning toward the b-wave.  If bulls can sustain trade over the red line (chart below), then I'll give more thought to the diagonal.

Otherwise I suspect we'll see lower prices fairly directly -- in fact, the market could take out yesterday's low during today's session, if it wants.

In conclusion, no material change.  It's still anticipated that the market is unfolding a massive third wave, which should take prices significantly lower (first target 2500 +/-).  Trade safe.

SPX Update: One of the More Complex Corrections You'll Ever See...

Last update noted that we had an apparent impulsive decline in SPX -- and that told us that the odds favored lower prices were coming, which then happened almost immediately after Monday's open.  Monday turned into a nice downtrend for bears.  Interestingly, once SPX broke the noted black trend line, it traveled almost straight down to the next trend line on the chart below (in red).  There, it initially bounced, but then broke briefly below it and has been whipsawing around that line ever since, going back to mid-Monday.

Next is an edumacashunal chart, because we just witnessed one of the most complex corrections you'll ever see -- so this may be helpful to those attempting to master Elliott Wave.

What we saw was what's termed a "double three," however it was an exceptionally complex example, because there were double threes within the double three, as well as expanded flats.

Starting at Monday's first low, we had red ABC to blue W, then another red ABC to blue X, then another red ABC, this time as an expanded flat, to blue Y, which completed the larger green W.

From green W, we had red ABC to blue W, then another ABC (not labeled) to blue X, then another ABC to complete another blue WXY, and thus complete green X.

Then we had a simple expanded flat red ABC to complete green Y.




These types of patterns are borderline impossible to predict, outside of the very short term (for example, on our private forum, I called the first top at 2748 in real time to the point -- but there was no way for me to know at the time that was only the first of SEVEN total ABCs!).  In these events, nimble traders who take at least partial profits on the new low win, while less nimble traders may end up getting whipsawed.

Corrective waves are inherently unpredictable, and they offer the greatest opportunity for traders to lose money if they're not careful.

Most of our money is made during impulse waves, either up or down.  Sometimes it's good to take a break when one is expecting a fourth wave (which is what I suspect the above pattern is), because they are known for their complexity, and can be all-but-impossible, or even literally impossible, to predict.

Now, the tricky part is:  While the above pattern does represent a complete fractal at one degree (meaning the market can trend again if it wants to), we can't confirm yet that this correction is actually over!  Because, just as we see the fractals within fractals on the above chart (WXYs that complete only to form even LARGER WXYs), it's not outside the realm of possibility for the large green WXY to mark only wave W of an even larger WXY, with X unfolding into yesterday's close and Y-up still to come!

I'm not predicting that as the outcome because, well, NOBODY can predict that as the outcome at this stage.  It either happens or it doesn't.  However, at least we're alert to it -- and we can state with some certainty that it's quite unlikely the decline is complete OVERALL.

In other words, if we do get a larger Y-up rally, we would know from the pattern so far that it's likely a solid short op.

For now, we'll presume the WXY marks a completed fourth wave, with a fifth wave down to come in the next session or two, but if SPX cannot sustain a breakdown of the most recent lows, stay alert to the more complex pattern showing up, perhaps unfolding as a trip toward 2759ish before the next wave down begins.  Trade safe.

SPX Update

Last update suspected that the larger (2) may have ended (or at least this leg of such, if it wants to become more complex) and Friday offered ALMOST as much encouragement as bears could hope for.

The one thing bears would like to see that didn't occur is a sustained break of the black support zone (where SPX bounced).  It's actually bullish if that zone continues to hold (note similarity with the prior small decline) -- but for now, we're going to presume that it likely will break:

The next chart discusses why confidence isn't as quite high as it could be:

In conclusion, there's no change in the bigger picture, and the smaller picture is as encouraging as it can be for bears at this stage.  Trade safe.

SPX Update: No Material Change

Last update noted to expect higher prices and listed some potential resisistance zones, among them "2816ish."  Currently, that's where the market has stalled.  It's possible that will be it for this (leg of?) the rally, but as yet there are not enough waves off the high to make that as a definitive call.  Bulls could still pull out a double zigzag and hold the decline near the 2780-85 (ish) zone.

The most bearish count would suggest a micro bear nest, but sometimes the first one of these is a fake out.  Nevertheless, it's something to watch, because if it's a micro bear nest off this week's high, things are about to get ugly fast.  Today will probably be a pivotal session to determine whether we're dealing with a bullish double zigzag or bearish nest.

In conclusion, no material change overall, but today could be pivotal for at least the near term, if not the bigger picture.  Trade safe.

SPX Update

There was no update on Monday due to an unexpected power outage that lasted several hours, but I noted on our forum on Monday that there was a decent chance that Friday's decline was wave c of an expanded flat -- meaning the expectation would be for a new high for this wave.  This morning, it appears that's what we're going to get.

As I warned back on Wednesday, where it was already apparent the rally would have more legs than we had seen since the start of the decline:

There are some clear resistance zones along the way, any of which could put the kybosh on the rally -- but by the same token, it could run farther and faster than most bears are expecting.  The challenge for bears is always "not to give back all the profit they just earned."  I suspect when the rally is over, that will be reasonably clear.

Accordingly, we're currently not too hung up on targets, because there are many potential targets for this wave.  Instead, I've noted the upcoming resistance zones (note that last week's rally stalled just a point past the noted 2750-55 resistance zone):

In conclusion, there are a lot of questions as to the intentions of this rally, though it is finally nearing its first inflection zone, and will soon have enough waves to be counted as a POTENTIALLY complete corrective rally.  The challenge is that we're not certain exactly what waveform the market wants here (for example, this could only be wave a/1, with a b/2 correction and another large leg up still to come), so we'll continue to take it as it comes.  Trade safe.

SPX Update: First Upside Target Captured

Just a quick update today, as there's not much to add from last update, except to note that the "textbook target" of SPX 2730-40 was captured, and proved to be resistance for a time.  Futures suggest a gap up over resistance:

In conclusion,, this has been the strongest rally we've seen since this decline began, which tends to validate my view that it's a higher-degree corrective wave (potentially (2)/B) -- which is why I warned from the start that it could run farther and faster than many were expecting.  Ultimately, I do tend to continue to believe that the rally is "just a correction," as opposed to a resumption of the bull market.  Trade safe.

SPX and INDU Updates

It seems like weeks ago, but SPX captured the first upside target/reversal zone from Monday's update and then reversed hard straight into new lows -- and has since bounced hard as well.

I currently do not have a strong opinion as to where this bounce is ultimately headed.  There are some clear resistance zones along the way, any of which could put the kybosh on the rally -- but by the same token, it could run farther and faster than most bears are expecting.  The challenge for bears is always "not to give back all the profit they just earned."  I suspect when the rally is over, that will be reasonably clear.

There are a lot of different ways to count the decline from the 2800s, which makes calculating the target for this bounce challenging:

INDU found support near the blue support line that's been on this chart for a while:

In conclusion, it's currently speculative as to whether this rally will find legs or not.  It may just intend to test one of the prior breakdowns and reverse directly, or it may intend to retrace 50% of the decline (from the all-time highs).  We'll take it as it comes.  Trade safe.