SPX Update: Next Key Zones

Last update suggested SPX might bounce then head lower in another wave, to test the blue trend line below.  It did bounce (but not much), then tested the blue trend line that very same session.  It later broke that line and is now below it.  That seems to be the first zone bulls would need to reclaim on a closing basis:

Bigger picture, there could be a lot on the line for bulls:

In conclusion, bears broke the next support level (the blue channel in the first chart) but now need to hold that break.  The next couple sessions could thus determine direction for the upcoming weeks.  Trade safe.

SPX Update: Next Upside Target Captured -- Market Reacts

For the past couple weeks, we've been focused on SPX heading up to tag the black trendline on the long-term chart, and on Wednesday, it did.  On Thursday, the market reacted hard, dropping 125 points, (something we haven't seen in a while).

It's mentioning that in doing this, SPX dropped all the way back to the previously-noted blue trend line.  We'll see if that line acts as support:

It's pretty interesting how well the trend lines on the long-term chart above, some of which are roughly a decade old, line up with the trend lines on the chart below, which are only a few months old.  So whichever chart you were watching, you knew that SPX had tagged resistance -- but if you were watching the long-term chart above, you also knew it was a significant resistance zone, and an upside target zone.

In black, I've sketched in one possible path the market could take.  My first instinct is that the current decline, as sharp as it was, is probably still a fourth wave, and thus not a long-term top (though it could last a little while, depending on how complex any presumed fourth wave wants to get).  I'm open to changing that view, but at this moment, my first inclination is that the rally isn't done yet.

In conclusion, SPX captured its next intermediate target zone and reacted pretty dramatically to it.  Despite that dramatic reaction, there are as yet no key trend line breaks and no key overlaps, so (for now) we'll assume the long-term trend remains up -- at least unless/until bears break some key zones.  Trade safe.

SPX Update: Still No Material Change

Yesterday, cash officially captured my next near-term target of 3520-25... today it's going to launch higher right at the open.  And when we look at the recent charts, we can immediately see what triggered this reaction:

Bigger picture, I still expect we're going to run higher to ultimately test the black trend line -- and here again, note the value of this "simple" chart.  I first pointed this out when SPX broke out over blue, and it's done nothing but run higher since that breakout:

In conclusion, there's nothing much to add regarding the market.  At some point we'll get a correction (presumably the market cannot run to infinity), but we'll just, as I've said for a while, have take that as it comes.  For the bears, think of it this way:  Even if there were to suddenly be a sharp turn lower, if it's going to go anywhere meaningful, we should have plenty of time to get on board.  Trade safe.

SPX Update and Random Weekend Thoughts

Last update noted that the next near-term upside target was 3520-25, and the e-mini S&P futures (ES) have already tagged that in the overnight.

Near-term, SPX has established an uptrend channel within the broader uptrend channel:

Bigger picture, there's no change... still presumed to ultimately be headed toward black.

Beyond that, I just want to share a random "Supercycle-related" thought I've had more than a few times of late.  How many people are familar with the Hekla 3 Eruption?  (Note: I hate to use WikiPedia as a source, but amazingly, there is almost no good info on that eruption outside of the scientific literature, so such is life.)  This was a massive volcanic eruption that occured in Iceland around 1028 B.C.  It threw 7.3 cubic kilometers of rock into the atmosphere, leading to an 18 year period of pronounced global cooling in the northern hemisphere.  This in turn led to drought and famine in the Middle East, and many historians believe it was in part responsible for the rather sudden end of the Bronze Age, wherein multiple advanced civilizations entirely disappeared simultaneously.

Throughout history, we find periods of prosperity are linked to periods of climactic warmth:  The Roman Warm Period, the Medieval Warm Period, and the Modern Warm Period, for example.  The reason for this is obvious:  During periods of warmth, food can be grown pletntifully.  And, again quite obiously, food is the first basis of civilization (hard to build a thriving civilization during times of famine!).

During periods of cold, civilizations contract -- or end entirely.  The Earth has undergone climactic cycles for all of history -- in fact, the last Ice Age barely ended a mere ~12,000 years ago (actually, to be technically correct, the last Glacial Maximum ended ~12,000 years ago -- we're technically still in an Ice Age, just in the Interglacial Period of said Ice Age, known as the Quaternary glaciation.)

Anyway, we as traders know that the majority of people are usually looking the exact wrong way on things.  If the majority are looking down, the market tends to go up.  We know from history (and logic) that the current warm period is a blessing... and we know from history that it will likely one day end, possibly abruptly.  What if everyone is looking the wrong way again?

Note I am NOT saying "oh, we're headed for another glacial maximum" or anything that bold.  I'm just thinking out loud, sharing a random thought I've had many times.  A global cooling period would lead to a massively contracting global economy, the exact opposite of what we've had since the end of the Little Ice Age, which ended around 1850 A.D.  

Just food for thought.  Trade safe.

SPX Update: Inflate or Die

Last updated discussed how SPX had reached a potential signal line, and not to assume that its reaction would be bearish:

Note the blue trend line, which SPX has just reached... and don't just see one side of that trade (i.e.- don't view it only as "resistance"); note what happens if it sustains a breakout:

The Fed has since announced that it doesn't care about inflation anymore (if it ever really did)... and SPX has since cleared that line.

I don't think bears should underestimate the Fed's signal, because by keeping interest rates artificially low while at the same time (basically) committing to ignore inflation... what other options will savers have but to be forced into high-risk investments?  They gonna put their money into a CD at the current Special Introductory Rate (*for new customers ONLY) of .0000000000000000132% while inflation runs away from their money?

And keep in mind that my second target was 4000+/- (and yes, 3980+ would be within that +/- margin, so knock it off!)... and my out-loud musing about the potential bullish options from 8/24:

Maybe it doesn't seem so crazy anymore.

In conclusion, SPX has broken out over its first long-term resistance zone... bears will have a small window here to whipsaw that (and any whipsaw could start from a little higher), but if they can't, then SPX may (ultimately) be on the way toward the next higher resistance zone (as discussed in the first chart) and my second target.  (Again, we're talking intermediate-term here, so that wouldn't preclude a near-term correction after the current rally completes -- the next near-term upside target that I discussed yesterday morning in the forum was 3520-25, so that could be one zone to watch.)  Trade safe.

SPX Update: Long-term Chart Shows SPX at Important Line

 Last update discussed how we were just going to focus on basics for the time being, and today, we have an important long-term chart to examine.  Let's get right to it.  The following chart is simply the bull market since 2009 (I don't buy into the commonly-accepted idea that "a 20% correction is a bear market!" -- I think that's too simplistic).

Anyway, note the blue trend line, which SPX has just reached... and don't just see one side of that trade (i.e.- don't view it only as "resistance"); note what happens if it sustains a breakout:

We can see this is likely an important zone.  Breakouts have taken SPX toward the black trend line, while rejections have sometimes taken it back toward the first red trend line immediately below the blue line  (Except in 2017, it hugged the line for months before breaking out.)

On the hourly chart, nothing has changed and SPX has remained within its uptrend channels:

In conclusion, nothing has changed since last update, but SPX is reaching a zone that has been important in the past.  If it wrestles with that zone, we could see a correction develop.  If it sustains a breakout over, then bulls may continue their party.  Trade safe.

SPX Update: This Bull is a Bear

First off, I did work on the extended Supercycle piece I've been working on for a while -- but I didn't finish it.  I may never finish it.  I have a pretty good idea of what I want to say, but I'm wrestling with how to say it.  Honestly, I don't think I've ever wrestled with a piece as much as I've wrestled with this one.  There's no good way to talk about things.

As far as the market goes, last update noted that INDU had given a traditional warning sign, but that I was skeptical of it thanks to the Fed.  As it turns out, the Fed is going to buy their way out of it (again).  I've said it before, but this market reminds me a lot of 2012, where it just keeps grinding higher in the absolute ugliest way possible.  I had a heckuva time counting the market for several months that year, too.

This is why, outside of my big picture outlook that predicted the crash to 2100+/- SPX, followed by a recovery to new all-time highs, there hasn't been much to latch on to in this market.  I can tell you that it has been steamrolling a lot of people's signals, though.  

The Fed is warping everything.

Because I've been doing this long enough to know when a market isn't behaving, for today, I drew up a whole new chart.  I think for now we just focus on the basics and avoid the fancy stuff.  There's no room for nuance in this market right now.  Maybe that changes tomorrow.  When the character changes, I'm sure we'll be on top of it, as we almost always are.

(Note: Typo.  "So far" is supposed to be "So for..."  So far, so for!)

So, in conclusion, for now, we'll just take what the market gives us in broad strokes until such a time as it lends itself to more nuanced calls.  Trade safe.

SPX and INDU: Will a Traditional Warning Signal Mean Anything in a Nontraditional Market?

Let's get right to the meat of the title:  INDU gave a signal that is, traditionally, something of a warning sign (at least for the near-term).  I guess we'll see if that means anything in this Bizzaro-world market:

SPX has now tagged the May target "to the point":

In conclusion, in most markets, I would take INDU's break as a warning sign.  In this market, with the Fed buying everything that isn't nailed down, things are a little unusual to say the least.  So I guess we'll see if it means what it usually means... but if nothing else, it should at least serve as a near-term caution for bulls unless INDU can reclaim the August high directly.  Trade safe.

*****

p.s.-- I'm getting closer to finishing my piece discussing/diagnosing some of America's (Supercycle-related?) ailments.  I got a good bit written last night, with the voice in my head coughing up Alec Baldwin from Glengarry Glen Ross to push me past my hesitations.  ("Let's talk about something important!")  

(Then in response to my considerably-long list of internal objections:  "Well I'm going anyway.")

Some things just need to be discussed, even when it might be easier not to discuss them.  For those interested, here's the last piece I wrote about it:  Is America Approaching the End of a Supercycle Rally?

The new piece is maybe halfway done, so there's a chance I'll finish it this weekend.  Stay tuned.