SPX and INDU: Shift

Last update discussed the importance of last Monday's low, and on Friday, bears busted that low.  This creates what appears to be an impulsive decline, at least in SPX (second chart), which suggests that there will be at least one more leg down after the next bounce.

We'll start off with INDU, which suggested from the start that Monday's low would ultimately fail, though bulls ran it so incredibly close to the key overlap that I began to question my initial read.  It turns out that read was correct.

While INDU has a lot of noise in its chart, SPX appears cleaner:

In conclusion, we now have to favor bears for at least one more leg down.  Because there are multiple valid interpretations of where the minute 4th wave high (blue 4) lands, it's unclear if the current decline is still unfolding, or if it will begin a second wave bounce immediately, so we'll simply have to play the short-term as it unfolds.  Bigger picture, though, we're unlikely to be at a significant bottom just yet.  Trade safe.

SPX and INDU: Important Support Zone

Last update, we looked at some of the warning signs for bears that the decline may have completed on Monday, and the market has been range-bound since then.  INDU did not quite overlap its prior wave 1/A low and was rejected from that zone, leading INDU and SPX both to retest Monday's low.

So far, that retest has held:

Yesterday's low also coincides with a second test of the long-term blue trend line on the chart below:

In conclusion, one thing the market has done with the last couple days' action is solidify the significance of Monday's low.  If bulls can hold that low, then they're clear for new all-time highs.  If bears can break that low, then it probably shifts things to bearish for the immediate foreseeable future.  Trade safe.

SPX and INDU Updates

Last update thought that INDU would likely bounce shortly after the open in a fourth wave... but the market is getting close to challenging the idea that the current bounce is a fourth wave.

We looked at SPX's 50 DMA last update; here's INDU's:

Unlike INDU with its choppy pattern off the high, SPX looks like a more straightforward three wave structure, so far.  Bears were unable to sustain a break of the uptrend channel, which is the first step they need to stretch the correction farther.

It's worth noting that SPX almost-perfectly tagged a trend line I had highlighted earlier in the month (and have highlighted on and off for years, in fact), and so far, that trend line has held.

In conclusion, bears will probably need to stall the current rally fairly soon if they want to keep hope alive that the bounce is a micro fourth wave.  Even if there is overlap of the prior 1/A low, there will still be bear options for a more complex correction, so we'll take that as it comes.  Direct new highs (if they occur) will be disappointing to bears, but we were not anticipating this to be anything other than a correction to an ongoing bull wave (a fourth wave decline at the end of a larger third wave), so we'll see if bears can get more out of it or not -- but we shouldn't hold our breath too hard or get too upset if bears can't turn it here.  But we haven't overlapped anything yet (just trying to prepare bears mentally in case it happens!), so if bears can turn it here, then we may end up with a larger impulsive decline, and that would certainly help the bears for the next higher time frame and a larger correction.  Trade safe.

SPX and INDU Updates: Bears Show Up

Last update noted that we could finally be nearing a correction, and here we are.  I spent a lot more time charting than I had anticipated, so I'm going to let the charts do the talking from here.

SPX weekly:

SPX near-term:

SPX Daily:

INDU:

In conclusion, last update's suggestion that we could finally be nearing a correction is no longer in doubt -- we are officially in our first decent correction since early December of last year.  The pattern off the high is a bit screwy, so there's little in the way of concrete targets at the moment.  Trade safe.

SPX Update

Last update noted that SPX had run to a possible resistance zone, and that zone sparked a small correction -- so far.  Whether that will turn into a larger correction remains to be seen, but as noted on the chart below, a run toward the bottom of the channel is at least possible at this moment:

In conclusion, there's still not much to add.  Long-term, the trend remains up.  Near-term, a correction isn't out of the question, as the market has maintained a nearly straight-up trajectory since the beginning of October in an apparent (and assumed, since October) third wave -- which does mean that, at some point, SPX will need to form a larger fourth wave.

As readers have noticed, I haven't been too anxious to attempt any top calls (with good reason, it turns out), as third waves often run longer than seems reasonable, which makes them difficult to trade against.  That said, we could finally be nearing corrective territory -- but I'm awaiting a little more in terms of firm signals from the market before saying much more than that.  We'll see how the next few sessions shake out, but it's not a bad time for bulls to at least consider showing a little more caution than they've needed to for the past couple months.  Trade safe.

SPX and INDU Updates

Not much to add since last update, except to note that INDU is backtesting the first long-term breakout zone:

And SPX has run to a potential near-term resistance zone:

In conclusion, no material change.  While a near-term correction could begin at any time, there is presently still nothing to suggest anything other than a continuation of the larger uptrend.  Trade safe.

SPX and INDU: Market Attempting Key Long-Term Breakouts

Last update provided a timely invocation of "Never short a dull market," and the market has rallied nonstop since.  Today, we're going to take a look at a couple of potentially important long-term breakouts.  First, SPX:

We can see SPX is attempting a breakout over its long-term channel, which goes all the way back to the beginning of last decade.  The channel isn't perfectly defined, though, so there's a little wiggle-room there -- but going back to 2011, the only other time SPX got above the black line was at the end of 2017, during the prior minor extended fifth -- so this breakout will be significant if it sticks, and would indicate that the bull market is entering an acceleration phase (as crazy as that may sound to bears).

"If it sticks" is the operable phrase, though, and the market has not yet tested the breakout, which it would normally be expected to do at some point.  In the event that test were to fail significantly, then we could see a redux of the beginning of 2018.  Presently, I do not expect that to occur.  Back at the beginning of 2018, long-time readers will recall that I actually predicted 2018 would "rhyme with 1987" -- that we would have a mini-crash in the context of an ongoing bull market.  That prediction proved uncannily prescient, as we had both a deep and scary mini-crash, and now a resumption of the "ongoing bull market."

Point I'm getting at is that the waves appear to be in a much different position than they were in 2018, and SPX appears to need multiple fourth and fifth waves at higher degree before it can have a longer-term correction again.  Though, to be entirely fair, it does have about 300 points of downside that it could play with if it wants, so I suppose there's some room for a scary intermediate correction -- but we'll worry about that if and when the breakout whipsaws, because we could just as easily see a repeat of 2017's extended fifth, where RSI just keeps getting more extended.

In other words, as the advice so often has been for bears over the past 10 years:  Await an impulsive decline before getting too excited.  If an extended micro fifth materializes here, then we could run another 200-300 points without any significant corrections.

So we'll have to live in the moment.  ;)

INDU is likewise attempting to breakout over a long-term trend line -- in this case, represented by the blue line:

In conclusion, SPX and INDU are both staging breakouts over long-term trend lines, which could put them into acceleration phases (as crazy as that may sound at this stage).  We will continue to track the short-term and stay alert to any potential impulsive declines, because the next impulsive decline could signal at least a larger, potentially-tradeable fourth wave.  Trade safe.