SPX and INDU: Blogger Glitches and the Market

Wow, some weird Blogger glitch just deleted my entire piece here, so I have to start over with minutes until the open.  Lovely.

Anyway, as I was saying, in the last update, things were looking reasonably good for bears, but the market had not yet sustained breaks of any of the key levels we were watching.  As fate would have it, those key levels proved to be significant support and the market bounced up to new highs from there.

Predicting B-wave highs and C-wave declines is always difficult business, which is why I titled the original post "Out on a Limb."  If bears are going to make a stand on that count, then they probably need to prevent bulls from sustaining trade north of 3383ish.

In conclusion, bulls aren't out of the woods just yet... but given that we know (or continue to believe we know, anyway) that the larger degree trend is up, it's tricky business predicting countertrend declines, so my long-standing advice of awaiting an impulsive decline continues to hold.  We should have a clearer idea in the next few sessions as to whether bears are going to show up soon or not.  Trade safe.

SPX and INDU: So far, so good

Last update went out on a limb and predicted that we were at the beginning of a new wave down (likely a large C-wave to completer a complex fourth).  Bears did briefly break their first key zones, but have not yet sustained those breakdowns.  They may do so today.

No change, and the all-time high is now the key zone bulls need to reclaim.  INDU broke its red trend line, and is testing the first blue line:

SPX briefly broke 3325, but closed just above it:

SPX has begun to whipsaw the red breakout, which is a good step for the bear case:

Finally, I don't know if I remembered to mention when SPX captured its downside target, which was the 50 day moving average (red 4 wave previously placed right at the spot where it bottomed), but this chart remains relevant because (if the C-wave decline idea is correct) it may now test the lower black trend channel or thereabouts:

In conclusion, no material change from last update.  There's simply no way to EVER say, "Oh, this is definitely 100% the correct prediction," but so far, everything is going the way bears need it to go.  We'll see if they can keep that up.  The first meaningful zone for bulls is the all-time high, though a brief break of the all-time high would NOT immediately negate the preferred count, sustained trade above the all time high would certainly cast it into doubt.  Unless that happens, or unless the market shows strong signs of bottoming, I'll continue to favor the C-wave decline as shown.  Trade safe.

SPX and INDU Updates: Out on a Limb

Last update noted that:

One ongoing possibility is for the low in SPX to be a b-wave low instead of an impulse, which would put the market in a complex 3-3-5 flat. Such a flat could make a new all-time high, then reverse not too long after and retest the recent low.

For now, that's the count I'm going with, though the first step bears need to accomplish is a sustained breakdown at 3325 in SPX, and sustained breakdowns as shown below in INDU:

IF the C-wave decline is correct, it could play out something like this:

SPX would count as follows, and would follow a similar path to INDU. If this count is even correct -- and so far, we don't have an impulsive decline, so this could either be wrong, or be early (the rally could continue a little higher if it wanted without causing problems for this count immediately).

In conclusion, long-time readers know that it's rare I only publish one count, so keep in mind that there are many caveats here, and I can't guarantee that the rally doesn't continue unabated.  Nevertheless, for the time being, the count shown above is the count I'm going to favor until the market says otherwise (a significant continuation of the rally would create problems for the above count).  As noted, there are some early key levels to watch (3325 SPX, INDU trend lines) that would help add slight confidence to this count.  If the market holds those levels, then patience is probably in order.  Trade safe.

SPX and INDU: "More of a Wrench"

Last update discussed the potential for a bounce to begin immediately, but theorized that such a bounce would probably result in another wave down.  We've had a massive bounce since, and today is likely to open near the all-time high, which is going to make things a little tricky.  One ongoing possibility is for the low in SPX to be a b-wave low instead of an impulse, which would put the market in a complex 3-3-5 flat.  Such a flat could make a new all-time high, then reverse not too long after and retest the recent low.  (If SPX stalls shy of the all-time high, that would keep the impulsive decline on the table).

INDU turned right at the 3/C inflection point, which also leaves similar options.

In conclusion, the wave I discussed in detail last update -- blue 4 -- may throw more of a wrench into things than I had initially anticipated.  If that wave is indeed a b-wave, it opens up the potential for any new all-time high to be followed by a fairly direct reversal back toward the recent low.  (And the caveat:  In the event that SPX clears the all time high on increasing momentum, then we'll have to call all near-term bear cases into question, but we'll burn that bridge if we come to it.)  Of course, if SPX stalls shy off the all-time high, then that would make things more simple for bears (and make this test of the high an obvious short op)... but we're so close to it that a discussion of other options was well-warranted.  Trade safe.

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.