Monday, January 31, 2022

INDU, COMPQ, SPX, and a Whole Bunch of Interesting Data

The near term charts remain messy, so we're going to continue focusing on the longer-term chart pictures.

Before that, though, I'd like to share some interesting data I've gathered from various sources over the past week, starting with this (below).  Almost half of the members of SPX, and 76% of COMPQ, have already experienced drawdown equal to or greater than 20%.  Almost half of the NASDAQ has declined 50% (or more) from its 52 week highs:

Next, retail investors have remained net buyers during the drop (this can be something of a contrarian indicator, since retail investors aren't considered "smart money"):

Next, a chart showing that the Federal Reserve's holdings of "Trashuries" is now almost a third of the total market:

Finally, company earnings guidance has turned negative for the first time since April 2020:

Let's move on to the long-term charts, starting with a "legacy" chart of INDU:

Below is another legacy chart, this one of COMPQ, which, unlike INDU, has already tagged its noted trend line:

SPX very-long-term trend line (again) below.  Are you sensing a theme here...?

Finally, the SPX chart that proved incredibly accurate at foreseeing the recent top:

Near-term, one possibility is that SPX is forming a fourth wave triangle.  I posted the chart below to the forum during the session on Friday.  This count is speculative at the moment, not a "prediction" yet, and would be ruled out if SPX sustains trade over 4453 (which, if it happens, could take SPX toward 4525 or beyond):

In conclusion, as we've seen across markets, there is support at (and a bit below, in one case) the recent lows in the form of long-term trendlines.  As long as bulls can hold those, then they at least keep hope alive for a continued bounce, and even for a last trip to overhead resistance (though I wouldn't hold my breath waiting for that; easy to get caught looking in a market like this) -- but in either case, as I preached throughout December, I believe this remains a "sell the bounces" market.  Trade safe.

Friday, January 28, 2022

SPX Update: Other Than That

The market has remained stuck in a trading range since January 24, so there's little to add to the past few updates, except to note that I have examined some additional markets since then, and so I'll reiterate that I think any sustained new low will put the odds increasingly in bears' favor.  Meaning if that condition is met, it will become increasingly likely that the bull market we've been in since 2009 has truly ended.

Other than that, not much to add.  ("Other than that, Mrs. Lincoln, how was the play?")

Although I should mention that I noted in the forum during the session yesterday that, near-term, I suspect yesterday's low in SPX is a b-wave, meaning the market should break that low.

Note that SPX has, so far, been unable to sustain trade back above black (cue AC/DC):

In conclusion, while I spent most of December warning that it was "Time to Sell the Rallies," to reiterate: if SPX/ES sustain a break of this month's low, odds will increase that a true bear market has finally begun.  Here, I'd like to quote a bit from one December update:

Now, here's the "market point": The Covid crash was a pretty clear fourth wave. That means we have almost-certainly been riding out the fifth wave ever since. And the fifth wave is the final wave of a move -- which, now that we're finally getting into a potentially-complete wave structure, means we're likely approaching the end of the 12+ year bull market. 

What we're currently trying to nail down is whether the fifth wave of the fifth wave of that larger fifth wave has completed or not. 

Read that again. 

As I mentioned last update: 

Even if SPX manages to make a new high, that will probably be the fifth wave, and (barring an extension) is thus reasonably likely to be followed by a correction (or worse) anyway. 

In other words, even if SPX manages to make a new all-time high, we are probably into territory where we should be considering selling the bounces. Let's look at the near-term chart first, with the emphasis that "bull 5," even if it shows up, could very well be the final high of this 12+ year bull market.

Trade safe.

Wednesday, January 26, 2022

SPX, NYA, COMPQ: Big Fed Day

Today is the Big Fed Day, and the Fed is now staring down the market with one eye and inflation with the other.  "Which eye will they blink first?"  -- is the question.

So there's a lot to cover today via charts.  First, everyone wants to know if there's a remaining bull option, so it's important to clarify that while the fourth wave discussed previously in SPX is off the table, a higher degree complex fourth wave is not.  Let's start with looking at that -- and even short-term readers should remember this chart, because we looked at a version of this option as recently as last month.  The thing about complex fourth waves is that they are, well, as the name implies, "complex," and can keep tacking on runner waves, extending the fractal.

Next, let's look at the chart that had us turn bearish right at the high -- in essence, the chart that "started it all" and got us this far on the right side of the trade immediately before this little mini-crash began:

Next, an interesting observation about the recent low, which did come within the red target zone:

Finally, sometimes it's nice to step back and simplify:

In conclusion, the Fed has driven this rally for most of the past 13 years (with the brief exception of 2017-2019, give or take a little, when the Fed eased off the accelerator), so don't underestimate the significance of today's Fed statement.  If they don't at least hint at a course reversal or delay, the market will remain under significant pressure.  The problem is, the government cannot intervene in a market for a decade without serious unintended (and intended) consequences -- and the Fed has (as many of us have warned) painted the market into an unsustainable corner.  

We can see on the charts that the market has found support at an inflection zone while it waits on the Fed.  Today could be for all the marbles.  Trade safe.

Monday, January 24, 2022

SPX Update: How Soon is Now?

Futures are indicating that the fourth wave option might be off the table.

In December, I began warning that it may be "time to sell the rallies" and reiterated a number of times that it was my belief that "the top is closer than the bottom."  I cited the very long-term trend line on the chart below as my "line in the sand," and then referred back to this line repeatedly throughout last month.  

As one example, on December 20, I wrote:

I hold to my view that the top is closer than the bottom (long-term), unless there's a breakout at the very long-term trend line I've mentioned repeatedly over the past few weeks. That trend line will remain as the first litmus test where I might question my current thesis:

We then tagged that line a few weeks ago, failed to break out (and reversed), immediately began looking for a trip south of ~4495, and the rest has been history so far.

On Friday, we reached the next downside target zone, and futures are indicating this morning that line will break, so the market wants even lower:

In conclusion, I would emphasize that it's important to reread the annotations on the first chart from 12/1/21 and 8/2/21.  This market has been playing with fire for a while, and we've known that.  We also began looking for a top right at the all-time high, and while the initial lean was for a bottom "below ~4495" (ideally at the black line near 4400 above), if things are more bearish than that, then we haven't missed much.  We'll revisit everything on Wednesday and take a look at the near-term then, but nothing that's happening now should come as too much of a surprise.  Trade safe.

Friday, January 21, 2022

SPX Update: 4495 Target Captured: ~300 Points of Profit to Begin 2022

SPX captured its target zone yesterday, so we'll just pause here for a moment and let the charts do the talking:


Very long-term is currently an ugly bar on the monthly in snapshot, but the month isn't over yet:

In conclusion, SPX captured its January 3 target zone yesterday, so we'll pause here and let the market dictate whether it's going to find support soon or transmute into something more bearish.  Trade safe.

Tuesday, January 18, 2022

SPX Update: 100% on the Year

On January 3, I mentioned that I liked the idea of a nearly-immediate top, which would then lead to a c-wave decline below ~4495 -- and while that probably seemed a little crazy at the time, it doesn't seem so crazy anymore, as (at the time of this writing), futures are down at total of about 270 points from the January 4 high, getting very close to the ~4495 target zone.

More recently, the last two updates discussed the near-term count I was leaning toward, as follows:

The low is a micro b-wave, which could run toward SPX 4742-60 in a micro c-wave, before reversing back to break Monday's low [4582].

And this lean, too, was a hit, as SPX broke "Monday's low" of 4592 during yesterday's session.

Accordingly, there's not too much to add to this year's updates, except to note the following (discussion on the intermediate-term chart below):

Similar notes on the near-term chart:

And no update needed to the long-term chart:

In conclusion, SPX continues to be "so far, so good" on following the path I laid out on the first trading day of the year.  The main question we'll face next is whether the decline will remain a c-wave at the discussed degree and thus find support (at least in the foreseeable future) and bounce to a new (potentially final) all-time high, or if it will instead turn into something more ominous.  Trade safe.

Friday, January 14, 2022

SPX Update

Last update laid out some options, with the leading contender being:

I think if I had to pick one, I'd probably lean very, very SLIGHTLY toward option 2, as of this exact moment.

Option 2 was:

2.  The low is a micro b-wave, which could run toward SPX 4742-60 in a micro c-wave, before reversing back to break Monday's low.

And again, "so far, so good."  SPX found solid resistance in the noted zone, leading to a reversal and drop that will exceed 100 points. 

Of course, bears will want to be cautious as we head lower into prior support (it is still three waves down from 4748), and of course would want to be extremely cautious were SPX to sustain a breakout over upper black and particularly over 4749.

Obviously, the 4742-60 resistance zone discussed in last update has at least been good for a solid trade, so other than that, not much to add.  Trade safe.