SPX Update: Four Chords and the Truth

Two interesting charts today, first up is the SPX near-term chart:

As we can see, there are three pretty clear waves down from the recent all-time high, and it's interesting how perfectly that drop tested the upper boundary of the red triangle (which, if nothing else, goes even further to confirm that pattern as the right read).  So the question now is whether that's it for the correction, since there are enough waves down for a completed correction.

Next, is the bigger picture SPX chart, which captured its February upside target:

So, if we put these two charts together, we can see that there are enough waves for a completed correction (the bear option might be a bear nest or similar) -- however, in the event bulls do manage a new all-time-high, they do have blue overhead resistance with which to contend.  Trade safe.

BKX and INDU: Objects in Mirror May Be Closer Than They Appear

The market took a dive yesterday, after shocking comments by Minneapolis Fed Bank President Neel Kashkari, in which he finally publicly apologized for the fact that his parents apparently had no idea how to spell "Neil."  He also mentioned that while he originally had two rate cuts "penciled in" for 2024, he just realized that he actually has a doctor's appointment on that exact same day, so he might be forced to reschedule those rate cuts for 2025.  Or beyond, if bulls won't stop leaving annoying messages on his voicemail.  

Of course, the market has been banking on a return to "nOrMaLCy!!!!" which, to the market, apparently means ridiculously low interest rates and the printing presses spewing endless free money.  The market, of course, ignores the fact that the environment of the prior ~15 years was anything but "normal" and that rates were instead insanely low for insanely long, and QE Infinity is unsustainable.

As I wrote a while ago, though, this market has been suffering from an extreme case of "irrational exuberance," so Kashkari's comments serve as yet another potential wake-up call.  Thing is, wake-up calls have been ringing out all over for a while, but the market hasn't cared -- so we'll see if the "irrational exuberance" psychology finally starts to shift a bit, or if the market goes back to fueling itself primarily on the sweet sweat of its own drunken euphoria.

My guess is that when the market finally wakes up for real, it's going to get ugly beyond belief.

But we may not be quite there yet, and another high, even if we correct further in the near-term, is not out of the question.  Let's look at two long-term charts for clues, starting with BKX:

BKX is probably the most potentially bearish chart going right now in the big picture, though here again, another high is not out of the question as (C)/(3) could still be unfolding.  Without even labeling it, we can see that the decline from the most recent high is only three waves down so far.  If it becomes impulsive, then bears might be coming out of hibernation.

INDU is interesting as well, though here again, it's unclear if (iii) -- if that's what this is -- is complete. 

In conclusion, while bears don't have a lot to sink their teeth into yet, since there's not been an impulsive turn, there are ongoing hints that we're not in "a new paradigm" and stocks have not "reached a permanently high plateau."  We'll keep watching to see if there's already a turn underway, or if bulls can manage another high before the cliff starts to crumble.  Trade safe.

SPX Update: Triangle Confirmed, and What That Means

Yesterday, SPX confirmed the near-term triangle count (as well as any hypothesis is confirmed by the materialization of a predicted outcome, anyway) by revisiting the upper edge of the triangle zone:

So, without getting too far ahead of the market, what we have for certain is a confirmed triangle, and triangles are typically the penultimate wave of the larger wave in which they reside (i.e.- the fourth wave of that larger wave).  This in turn suggests that a larger wave completed at the most recent all time high -- however, since we don't have an impulsive decline yet, we (in actuality) don't know how much correction the market wants.  The most bullish case is that the correction is already over/almost over, while the most bearish case is limited only by our imaginations.  Problem is, it's too early to qualify as much more than highly speculative, so we should probably just wait to see whether the market forms a larger impulse or not before speculating too much.  That said, IF it goes on to form a larger impulse, then there's potential for a decent correction; if it doesn't, then business as usual will continue.  Trade safe.

SPX and INDU: Ape Wrill Fullz Day

Last update discussed that bears had work to do if they wanted to get anything going -- specifically, that they would first need to break below the blue trend line on the near-term SPX chart:

Typical of bears, though, they decided to knock off early for Easter weekend and thus failed to accomplish anything at all, allowing bulls to score another easy first down.  It's worth noting that the blue trend line will not be as important heading into today's session.

Bigger picture, the blue bull count and the (still ultimately bullish) diagonal remain the leaders, for now, with the black bear option probably placing as a distant third:

Assuming my assessment of those odds is correct, we can see on the chart that bears might have to wait quite a while before getting much beyond some near-term moves, as I've discussed before.  So, as I've also written before, bears probably want to await an impulsive decline before getting too far ahead of the market.  Bull markets can be somewhat boring, since the basic rule is just "follow the trend," but we'll continue to keep our eyes peeled for any interesting developments, nonetheless.  Trade safe.

SPX, BKX, INDU: Whose Line Is It Anyway?

Months ago, this market reached that point where all of us stopped talking about bear options with any conviction, and we're probably all still there.  Maybe rightly so.  Or maybe that alone is starting to mean something ("I subscribe to the law of contrary public opinion.  If everyone thinks one thing, then I say: bet the other way." -- Al Pacino in Glengarry Glen Ross, unintentionally outlining a layman's version of Contrarian Investing).  In any case, for now, I'll continue the established tradition of speaking about bear options only in hushed tones.  

So, while there are still more questions than answers about this market, it is interesting to watch BKX react to the old blue horizontal and (C)/(3) labels:

When I drew that blue horizontal months ago, I did place it where it is because I suspected it would act as resistance, so it would be premature to claim the 2/B count has completed, but it's interesting, nonetheless.

INDU still has some interesting options as well:

But, of course, for those above options to start being given any additional consideration, bears still have work to do in the near-term first:

In conclusion, BKX did reach an inflection point and has reacted to it, so we have to at least stay open to the possibility that might develop into something more serious, though bears do have more work to do first.  Trade safe.

SPX and INDU: Sorting Fly Dung from Pepper

This market remains less fun than a rabies vaccination, with less clarity than a speech by Joe Biden.

Be that as it may, we'll try to sort fly dung from pepper, starting with INDU:

Things get a little muddier when we also try to account for SPX:

Finally, the triangle mentioned in the last update remains worth considering:

That's it for today.  End of quote.  Repeat the line.  And trade safe.

SPX and BKX: The Federal Unnerve

On Wednesday, the market rallied like crazy after the Fed announced that it was going to cut interest rates by (to quote Fed Chairman Jape Owl) "over 9000."  In light of this shocking news, a blistering rally was the only logical response, since a rate cut of that magnitude would, of course, cure cancer, end death, and lead to the Earth maintaining a constant year-round temperature of 72-degrees.  All of which would be good news for a pseudo-wartime economy that's increasingly driven by ever-expanding public and private debt.  Though, to me, it seems a never-changing climate would negatively impact the government's rhetoric war against the natural climate and the public debt/"boosts to GDP" (wink wink) incurred in the name of "saving the planet by eliminating plant food (CO2)!" but the market took it as good news anyway.

And who are we to argue with the market?  When a rate cut over 9000 comes along, it can only be good news.  Hang on a second, I've just been handed a note from my editor...

Er, according to this note, the Fed didn't cut rates at all!  I apologize for the error and wou...

NOTICE: In accordance with 1984 US Code § 2fu,

THIS BLOG HAS BEEN SUSPENDED

BY THE U.S. MINISTRY OF TRUTH

FOR SPREADING DISINFORMATION

Ha ha!  Just kidding, of course!  I think!  Felt like engaging in a little "this-is-the-actual-direction-America-is-headed" humor while we still can!

Anyway, the Fed kept rates steady, making last update's commentary ("No matter what the Fed does, even if what it 'does' is nothing at all, the market typically reacts like this is earth-shattering news that has either appalled or amazed everyone on the planet.") interesting in hindsight.  

Last update also noted that we were "still in 'nothing particularly bearish has happened yet' territory" and that "given the sideways nature of the near-term market and the fact that the larger trend is still 'up,' the onus remains on bears to get something going."  So, Wednesday's rally was not a terribly unexpected outcome, though its ferocity may have seemed (or been) a bit overboard.

Chart-wise, BKX finally reached its months-old upside target:

And for SPX, it appears the prior sideways grind was probably a fourth wave triangle, which in turn implies the current rally is a fifth wave (degree unclear), so bears might get at least a little relief in the not-too-distant future.  Worth a mention that it almost reached the conventional triangle target already, and one more high would hit it... but this market is so gonzo that it's tough to say what it will do (other than continue the trend) unless/until we see an impulsive turn.

That's about it for today.  Trade safe, and don't let the Fed bugs bite.