SPX and INDU: Yellow Lights for All Involved

Last update noted that "all roads still point higher -- for now," and SPX did indeed run higher during Friday's session.  We are now getting into more neutral territory, though, where there's presently nothing left in the charts that screams "higher!" -- at least, not at this moment (that can always change tomorrow, of course, since the market is a dynamic environment).

The market is now in a long and intermediate-term resistance zone.  I've illustrated this via INDU below:

SPX is getting into the zone where we can potentially count five complete waves up (I've had the "Bull: 5" label waiting on there at higher prices -- which we've now reached -- since last month).

In conclusion, we're getting into a "caution zone" for bulls.  This alone doesn't guarantee the market is nearing a reversal -- it can always plow right through these levels.  But it does mean bulls may want to walk and not run, and look both ways before they try to cross the street here... there could be an impulsive decline around the corner.  Once we see an impulsive decline, THEN it will be "as good as it gets" for bears.  But as of this moment, it's at least a yellow light for all involved.  Trade safe.

SPX Update: All Roads Still Point Higher -- for Now

Short and sweet today, as there's not much to add.  Last update noted that a complex correction was possible (meaning at best, bears could hope for a short break but all roads still pointed higher over the larger view), but that we'd watch for impulsive declines.  On Wednesday, we spotted an impulsive decline, but as I warned on the forum, it appeared that it could be wave C of an expanded flat (which is the one case where an impulsive decline is not the start of the correction, but the END of the correction).  Futures this morning are indicating that's exactly what it was.

Now, that pretty much ALWAYS leaves options for a more complex correction (shown on the chart below in black) -- but even if that materializes, all roads ultimately still appear pointed higher:

In conclusion, it appears now that we either head higher directly in a micro third wave off Wednesday's low, or we correct a little more first and THEN head higher.  In other words, not much for bears in the charts at the moment, though we MIGHT approach the end of Bull 5 in the next few sessions (still best to await impulsive declines).  Trade safe.

SPX Update: A Discussion of the "Time and Place" for Certain Analysis

Before we get into the charts, I'm going to reprint a response I posted on our forums last night, for the benefit of readers who may not have joined the forum:

First, let me preface this by saying that I, personally, do NOT like trying to slap "full" wave counts on waves like this one. Why? Because doing that causes me to start playing for a change in trend, and in this case, we don't need to anticipate a new trend! We KNOW what the trend is: It's up. And we've known that since early January.

Attempts to "anticipate a trend change" lead to only one thing: BUCKING the trend.

Can that be a good thing? At times, absolutely and of course, and some of my biggest winners have come from that very thing -- but there's a time and a place for it. During waves where we are (or should be, if we're humble) significantly uncertain of the wave's primary intentions, then attempts to "anticipate" frequently lead to quitting the trend too soon -- and/or flipping short and losing money.

That's the reason I haven't published full counts on the entire wave off the December lows. I learned a long time ago that's a losing strategy UNLESS you have a solid idea of what the wave wants to accomplish. And sometimes we do have that solid idea. But in this case, almost from the beginning, I made it clear that I didn't know what the wave wanted to accomplish, so I stopped publishing counts that could encourage poor trading.

Of course, I'm sure some places thought they knew exactly what this wave was from the beginning -- but how did that work out for them?

I know my approach frustrates some people and they just want "wave counts already!" -- but there's a time and a place for wave counts... and then there's a time to simply flow with the market like a raft on a river. "I've got it all figured out" wave counts have their place; but during waves that could be "any number of things" (especially waves that trend higher into new price territory, where you have no point of reference to work from) presuming one knows more than they actually do can lead to anticipation of an ending that never comes.

If you want a case study in how badly this can burn traders, just look at [certain well-known Elliott Wave subscription service]. I don't follow them at all, but occasionally people post their counts here, and the last big one I recall was years ago, around SPX 1500 or so -- and they told everyone to go "fully leveraged short" and HOLD, while I was telling people to ABANDON shorts just above their entry. I'm going off memory, but I seem to recall that they rode something like 200 or 300 points of drawdown before capitulating. (And for anyone "fully leveraged short," that's a "bankrupt!" sort of move.)

So for folks who want the market to follow their "ideas" of what it "should do," instead of flowing with the market and aligning with what IT wants to do, there's [those guys].

I will never be like that.

Using the current rally wave as an example, here's the thing: If this wave is going to make new all-time-highs (and, of course, it may or may not) then there's no TECHNICAL RULE that says it can't run another few hundred points unabated. There's only SPECULATION that it will or won't. It might even be well-reasoned speculation. But speculation isn't technical analysis; whereas wave counts should at least attempt to be.

In my view, this is where most similar services fail time and again: They mistake their speculation for some sort of technical read. As I said, there's a time and a place for that, and Elliott Wave Theory absolutely can and WILL give you DETAILED technical reads unlike anything else (IMO) -- but it will only do so when the market has created a fractal structure that allows rules to impact that structure, which can then "lock" the market into certain predictable behaviors.

But in a case like the current rally (as I said), there are no predictive "rules" that HAVE to be honored if it runs to new highs. Once it hits a new high, there are only guidelines, inflection points, and wave counts that may or may not consider things like extended fifths that could materialize -- but there's no "rule" that says it HAS to stop at X price point.

Thus, unless the move is spelled out in the charts relatively clearly (like it was with the recent expanded flat), I'm content to simply ride the trend during vague waves like this, at least until I see an impulsive decline come along. This was the same approach I took for the entire latter portion of 2017, during that huge extended fifth rally. Meanwhile, everyone else was trying to "anticipate" based on where THEIR count said the wave "should" end, and those people were calling tops left and right while the market barreled over them.

But worse, as a consequence, they ignored what the MARKET was saying, in favor of what their own little numbers and letters on a chart said. And they missed hundreds of points of profit.

The map is not the territory.

Almost every day for months, from September 2017 until the first portion of January 2018, my updates amounted to "still looks pointed higher," and some people got frustrated with that. Yet when that wave actually DID end, we were on top of it immediately.

So, like my madness or not, there is a method to it. 

Anyway, that's my philosophy during waves like this. Let the market tell us when it's REALLY done. And it will; usually loud and clear. 

All that to say: THAT'S why I haven't been showing counts trying to break down the whole thing since the December low.  

Moving on to the current charts, the most recent wave count I published was, of course, only a partial count of the most current fractal -- for all the reasons just discussed above.  On March 22, I showed the following prediction based on that partial wave count:

Both of the turns shown on that chart ended up playing out very well (though SPX bottomed just a little lower than shown).  Presently, we're still in a market that will require us to stay nimble, due to the potential for a more complex flat structure:

In conclusion, my expectation of a minor, but scary, decline followed by a reversal back above 2860 proved to be correct.  We're now into territory for another inflection point, so if we begin to see impulsive declines, we'll stay alert to a more complex flat.  Trade safe.

SPX Update: No Material Change

Last update concluded:

In conclusion, the market has done what it needed for a complete correction, but always reserves the right to form a more complex correction if it feels the need (it does complex corrections to draw out time and price, and to confuse participants).  Both options are pointed higher for the near-term, but we should approach the upside inflection point in the next session or three.  If we see an impulsive turn from that inflection zone, then we're prepared and already alert to the potential of a complex correction. 

And that conclusion is unchanged, though it's become obvious with the futures rally this morning that it was at least correct (that the fractals indicated the market would head higher over the near-term no matter what).  Accordingly, there's not much to add for today's update:

SPX's more detailed chart is below:

In conclusion, there's no material change from last update, and the prediction that the market would head higher over the near-term will prove out with today's open.  The complex correction does still remain on the table -- and keep in mind that the expanded flat pattern I've been arguing in favor of for the past couple weeks is NOT necessarily "long term bullish" -- even for the "bull count," SPX could break 2860, rally a little farther, and reverse strongly if it wants.  We'll burn that bridge when we come to it.  Trade safe.

SPX and RUT: The Charts in More Detail

Last update I mentioned that, due to the expanded flat I spotted in ES, I was still unwilling to commit to the bear case, and that turned out to be the right decision.  Wednesday saw SPX decline back to retest its presumed C wave low, and then bounce strongly.

This gets a little tricky now, because we are dealing with a corrective wave, and corrective waves do not need to follow the same narrow rules as motive waves -- which makes corrective waves less predictable.  We have a potentially complete correction at 2785, so the market can rally right on up past 2860 if it wants -- but it also has the option to form a complex correction if it feels the need.  Accordingly, I've outlined both options in some detail.

Let's start with RUT, as many of my readers follow and trade this index:

Moving on to SPX, we'll look at the detailed count first:

And the bigger picture chart, which is unchanged:

In conclusion, the market has done what it needed for a complete correction, but always reserves the right to form a more complex correction if it feels the need (it does complex corrections to draw out time and price, and to confuse participants).  Both options are pointed higher for the near-term, but we should approach the upside inflection point in the next session or three.  If we see an impulsive turn from that inflection zone, then we're prepared and already alert to the potential of a complex correction.  Trade safe.

SPX and INDU Updates

No resolution from the market yet.  Bottom line is bulls probably need to hold the recent lows:

INDU is presently three waves down from the high, but might suggest a bear nest on any sustained breakdown of the most recent low:

In conclusion, because of the potential expanded flat in SPX, I remain unwilling to commit to the bear case yet, but I'm not entirely closed to it, either.  The expanded flat potential is based primarily on a pattern that occurred last week in the e-mini S&P futures (ES), and sometimes ES can do screwy things due to leverage.  The bottom line is, if bulls can hold 2785, then they have a good shot at highs above 2860.  Conversely, if bears can sustain a breakdown at that zone, then it becomes "too many waves down," and the ball shifts to their court.  First potential warning sign for bulls would be a sustained breakdown of yesterday's low.  Trade safe.

SPX, NDX, INDU: Friday's Targets Captured; First Inflection Zone Reached

On Friday, I went "out on a limb" and called for an immediate 60 point reversal against Thursday's strong rally... and here we are, right at the 2800 target -- which is also an inflection zone

This is a little tricky right here, because we have some mixed signals from various markets, and while Friday kept bears in the game, the potential for an expanded flat still casts a shadow over everything.  Let's get right to the charts, starting with NDX, which has a pivot zone to watch.

NDX bigger picture bearish option is alive and well for now:

SPX closed right at its first target and inflection zone, essentially to the penny:

INDU continues to provide some hope for bears, depending on what happens today:

In conclusion, the market has reached its first inflection point.  While it's tempting to jump right into the bear camp, due to the potential for an expanded flat (i.e.- a "bear fake-out wave") I do want to see how the market reacts to this zone before doing so.  The next couple sessions should be important.  Trade safe.