SPX and INDU: Market May Have One More Trick Up Its Sleeve

(Please note that we've had a rash of new sign-ups for the forum, so if you've recently signed up, please be patient, and hopefully all the new accounts will be activated by Monday's session.  Also, YOU need to create the account, choose your username, and go through the signup process to create that account -- which will then be activated if you've followed all the steps.  I don't create usernames, etc.)

The market has run a little higher since last update, right to the first area where the blue c label was for the past few weeks -- but stalled during yesterday's session.  My first read (which is usually, but not always, the "right" one) yesterday was that yesterday's high was a b-wave, with the subsequent decline (which hadn't even occurred when I made that read -- so in real-time it was the "presumed pending decline") being an impulsive c-wave.  I posted the chart below (in real-time) early in yesterday's session:

The overnight futures (which the above 24-hour SPX chart includes) have since run almost exactly to the blue (C) projection on the chart above (2874 and pennies).  Below is the updated 24-hour chart as of a few minutes prior to today's cash open:

So this gets pretty tricky now, because we DO have an impulsive decline, but if the read above is correct, then that impulse is wave C of an expanded flat -- which would mean things are about to get whippy -- perhaps with a fake-out breakdown near the low, then a run back toward/beyond Tuesday's high, which could then mark the completion of wave 5 of C and reverse AGAIN heading lower... or worse, another b-wave high, another c-wave low, THEN the fifth wave higher completes around the time of the Fed meeting, only for the market to pull the rug out.

That's one option -- I'll do my best to keep up with it as it unfolds.

Because it's one of the few "logical" spots to watch (given the multiple ways the market can screw everyone up here), I've highlighted the rising black trend line on the chart below as the first semi-meaningful zone:

SPX:

In conclusion, we are in the ballpark where c of 2/B could complete, but the market may have a few more tricks up its sleeve before it's ready to call it quits (and do keep in mind that the alternate count will NOT quit).  We do have an impulsive decline off yesterday's high, but my first instinct was that it would be wave C of an expanded flat -- which means a retest/best of that high is still needed -- however, it's not cut and dried, and I'd say that's maybe 55%/45%.

In other words, this first impulsive decline (during yesterday's session) could VERY WELL mark the end of C -- it's not at all a clear call, nor (right now) is it what I'm leaning toward.

This is one area where swing traders have a bit of an advantage over short-term traders, as the market may do everything in its power to mess up short-term traders before this is all over.  We'll do our best to track it as it unfolds.  Trade safe.

SPX and INDU: INDU Captures First Upside Target

If there were any doubt remaining on the preferred count, the market answered those doubts on Friday with a blistering rally.  Things will get a little more difficult now, as the preferred count is for this rally to be C of 2/B -- and while a second wave needs to stall shy of the all-time-high in SPX, at B-wave does not have any such limitations.  Given that the alternate count is for ALL OF an ABC to have completed at 2728, this means that, as I wrote last Wednesday:

Thus, given that option 1 and 2 are both bullish for at least the next 90 points or so, bears might want to await an impulsive decline before acting with much aggression.

While we've now traveled roughly 90 points higher since then, the second portion of the warning -- to await an impulse decline -- still applies (and is almost always a sound strategy).

Let's look at INDU first, which has now cleared its a-wave high, which was the minimum expectation for the pattern:

Similar caveats regarding a second wave vs. a b-wave apply to SPX:

In conclusion, INDU has now rallied to its minimum expected target (SPX is just a hair shy), but we do not yet have an impulsive turn for bears to act against.  That can always change in the span of a couple hours, so readers who aren't members of the forum (where I would likely call it out in real time) will have to watch the charts carefully.

The past few weeks have been pretty easy money, but things do get a little more nuanced now -- at least for the moment.  Trade safe.

SPX and INDU: Leading Count Remains the Leader for Now

Last update discussed the options and warned:

Thus, given that option 1 and 2 are both bullish for at least the next 90 points or so, bears might want to await an impulsive decline before acting with much aggression.

We have not seen any impulsive declines yet, so hopefully this warning protected bears against yesterday's stop-busting rally.  While we can't entirely rule out Options 3 and 4 from that update, the strength of the current rally argues for Option 2, the "big C-wave" -- which was also the option I warned about on Monday, and which was discussed multiple times before that.

So the count that's been leading from the very beginning remains the leader now.  The SPX chart discusses that count in more detail:

INDU's chart doesn't discuss the running flat, but that's an option there as well:

In conclusion, assuming that the low is indeed a b-wave and NOT "ALL OF C," then bears will get a solid short op when the current rally completes.  There is a Fed meeting coming up on the 18-19, so that might be the logical spot for things to turn -- but we'll continue watching for impulsive turns in the meantime as well, because the discussed running flat does not need to exceed the a-wave high.  Trade safe.

SPX Update: Market Captures Target and Reacts to Monday's Inflection Zone

In the prior update, I warned bears that it was finally time to be cautious:

The market's been pretty straightforward for the last couple weeks with "no change/still pointed lower" being the preferred outlook each day. And, of course, that outlook has since proven to be correct. While there have been a couple minor inflection points along the way, we are finally reaching a more significant inflection point: The point where an ABC down from the all-time high could be complete or nearly so. 

That warning turned out to be timely, as the market did indeed react to the major inflection point with a blistering rally that began in that very same session.  But that wasn't all there was to it:

Additional consideration is that if we WERE to form a b-wave low near current prices, it would cause the most confusion to the market, since this is also the previously-discussed ABC inflection zone. The ensuing rally toward "or 2/B" would cause bulls to become bullish again, and the impulsive nature of that rally would really throw everyone for a curve. 

Sometimes the market instinctively chooses "the path of most confusion," so again, at least stay alert here.

The problem now is that, as I concluded in Monday's update:

In conclusion, there's no real change to the intermediate outlook, but we have reached the first 3/C inflection zone, and the market may react to it. If it DOES react, and especially if we get the complex correction, then things will become a bit less straightforward. 

For the record, "a bit less straightforward" was an understatement.  The market has now opened up no less than four viable potentials.  Let's discuss those in turn:

1.  One option is for the low to have been ALL OF an ABC off the all-time high.  That would culminate in new all-time highs.  I view this as an underdog to the remaining options, but I can't rule it out.

2.  Another option is for the low to have been the oft-discussed B-wave low, with the rally as a big C-wave that would retest or best 2892 before reversing lower in a big way.  Under that count, the rally is a higher-degree SECOND wave.  That count is near-term bullish, intermediate bearish.

3.  Unless/until the rally overlaps 2854, it could be a lower-degree FOURTH wave.  In that case, the rally would complete relatively soon and reverse to new lows.

4.  The most bearish option is for the three waves down to Monday's low to be a large BEAR NEST.  Instead of an ABC, it's wave 1-down, wave 2 up (to 2892), then a smaller wave I-down (to Monday's low), wave ii-up in progress.  The second I-ii is internal to wave 3 -- they're subwaves of wave 3, with iii of 3 still to come.  For that reason, if there's any breakdown at Monday's low in the near future, bulls should be VERY cautious.

So, that's where things sit at the moment.  All four options are viable, but I'm assigning the lowest probability to Option 1... however, a lot of that is gut instinct, and as I said, I can't rule it out on a technical level.

Thus, given that option 1 and 2 are both bullish for at least the next 90 points or so, bears might want to await an impulsive decline before acting with much aggression.  In the event of options 3 and 4, though, an impulsive decline could come as soon as today.

And let me just take a moment again to reiterate something from Monday:

Sometimes the market instinctively chooses "the path of most confusion."

Since I just outlined the wave counts, and it makes for even more confusion to attempt to chart all those options, today we're just going to focus on classic TA:

In conclusion, when I penned Monday's update, this is pretty much exactly where I did NOT want us to be today, but where I suspected we might end up anyway.  It is what it is, and all we can do is see how the market handles it next -- and at least we have some good roadmaps depending on the market's next move.  Trade safe.

SPX and INDU: Market Reaches First Important Inflection Zone

The market's been pretty straightforward for the last couple weeks with "no change/still pointed lower" being the preferred outlook each day.  And, of course, that outlook has since proven to be correct.  While there have been a couple minor inflection points along the way, we are finally reaching a more significant inflection point:  The point where an ABC down from the all-time high could be complete or nearly so.

While cash fell just a few points shy of my first next downside target zone (2737-47), that zone was captured in the overnight session by the S&P futures.  Now, I'm not presently favoring that this decline was merely an ABC that's complete/nearly complete, and consider it an outlier, but it is something we should be aware of.

In more immediate terms, the thing bothering me most right now is that we're supposed to be working on a C-wave or 3rd wave at blue degree (on the chart below), and 3/C-waves are normally stronger and faster than 1/A waves -- but that hasn't been the case so far.  That tells me we are likely either:

1.  Warming up for the meat of the move, via a series of first and second waves at micro degree.
2.  Not even in the actual 3/C wave yet.  This second option would mean we're seeing a b-wave low unfold, and we'll rally up toward 2/B before the "real" 3/C kicks off.

B-wave lows can be frustrating because there's just no way to predict them -- all we can do is remain alert to their potential.  So, that's what we'll continue to do.  If we begin to see small impulsive moves in the upwards direction, then that will be the first warning sign.

Additional consideration is that if we WERE to form a b-wave low near current prices, it would cause the most confusion to the market, since this is also the previously-discussed ABC inflection zone.  The ensuing rally toward "or 2/B" would cause bulls to become bullish again, and the impulsive nature of that rally would really throw everyone for a curve.

Sometimes the market instinctively chooses "the path of most confusion," so again, at least stay alert here.

No change to INDU either, and you'll note we're now right at the inflection zone shown by the projection lines that were drawn on the May 29:

The bigger picture INDU chart still shows the most straightforward path for ease of understanding, but the complex 2/B path discussed is alive here as well:

In conclusion, there's no real change to the intermediate outlook, but we have reached the first 3/C inflection zone, and the market may react to it.  If it DOES react, and especially if we get the complex correction, then things will become a bit less straightforward.  But we'll burn that bridge if/when we come to it.  Trade safe.

SPX and INDU Updates: No Change

No change whatsoever from recent updates.  Worth noting that INDU's 38.2% retrace sits near 24,770, which may provoke some kind of reaction from the market.  Other than that, nothing to add, so I've simply updated the price action on the charts:

Classic TA view:

And SPX:

In conclusion, nothing to add.  Last few update discussed that there was (as there often is) potential for a complex corrective wave, and that option still remains on the table, but will diminish the lower the market goes.  It still remains a case of "pay me now or pay me later," and all roads still point lower for the time being.  Trade safe.

SPX Update: Bears to Market: "Pay Us Now, or Pay Us Later"

Last update, I wrote:

On the chart, I then made reference to "complex corrections" -- this is because that the 2800-09 zone is an inflection zone. There is a possibility for a complex corrective 2/B that runs back toward 2900-30 before the next leg down begins in earnest. At present, I'm not favoring that, but instead suspect a more direct bearish resolution, but we can never rule out complex corrections (and can rarely predict them -- corrective waves by nature are inherently less predictable than impulse waves), so they should always at least be considered as a possibility. 

Since then, we have resolved lower directly, so that was a hit -- but I was primarily basing that call on the pattern off that low, which suggested a b-wave that needed fairly rapid resolution.  I do want to note that the more complex correction has become a bit more of a toss-up now.  I've shown that option in a bit more detail on the INDU chart below (black path):

Bigger picture, at present, all roads still appear to point lower.  The chart below only shows the most direct path for simplicity, but complex corrective options still apply, obviously.

SPX is in a similar position, with the same options as INDU:

In conclusion, it appears likely the market will remain intermediate bearish for the foreseeable future (until targets are reached).  The main question is whether that will happen directly, or if bulls can pull out a quick misdirection bounce before heading lower again -- but bears do appear to have a solid hold on the overall trend, at least for now.  Trade safe.