Okay, I really have to rush now. I literally had the entire update done, and at the last minute had a “eureka!” moment. Despite the association with the popular vacuum cleaner, Eureka moments don’t suck (rimshot). But now I’m having to re-do everything, so it won’t have as many charts as originally intended.
Bears are going to love this.
Anyway, I have to really boogie to get this posted because, basically, I had to do two updates tonight. I’m going to lead with the chart that led to the epiphany. I’ve been wrestling with the first leg of this rally since it started. It doesn’t count well as much of anything for an impulse wave, and I have looked at it every which way I could, without anything jumping out at me as being “right.”
All of that changes right now, though. With this new count, suddenly everything fits. The chart below is the NYA — the NYSE Composite Index. I often like the NYA as a better reality check, because it’s a much broader market representation.
And here’s the key realization: the first part of the rally doesn’t fit properly as an impulse because it’s not technically part of the same wave. Start with the big picture NYA count below, and it will all suddenly make sense.
Zooming in to the smaller waves, it looks possible that there could be another wave up left, if this is part of a 4th wave expanded flat unfolding now. It is also possible that the market has topped, though it doesn’t seem to fit the one-minute charts as well, since the wave labeled “alt. 5” looks like a 3-wave move.
In either case, a major top is either in place, or should be very close at hand. This completely changes my expectation of another major leg up. There may be one more leg up, but I don’t think it will be the big leg I was expecting. I’ll have to revisit all that later today when I have more time.
As shown on the chart above, it does appear likely that there’s still one more slightly higher high due, but I simply don’t have time in light of this new count to go back and revisit everything right now in the detail I’d like to. So, for the SPX, I’m going to suggest that bears watch the 1350 zone, and below that, the 1337-1340 zone for clues. If this is a 4th wave unfoldiing, then both of those areas have the potential to mark the bottom.
Below is a very short-term SPX chart which shows near-term support and resistance. If the market doesn’t hold 1350ish, then a drop to 1337-1340 looks promising since there appears to be an air pocket in between the two zones.
Yesterday saw the first material break of the 2-month trendline, which could mean the early stages of a trend change; however, this isn’t uncommon to see during 4th waves. I’m not going to put up the 10-minute SPX chart, because it doesn’t really convey any new info, other than the trendline break, and I need to rework the count there.
However, I am going to show the RUT chart again, because this one seems to jive with the idea that this is a fourth wave correction at a smaller degree than previously anticipated for SPX. I really like the way this all fits together now; I’ve literally been wrestling with it for about two weeks. SPX is likely still in a fourth wave, but it’s one degree lower — and the next top should be a major one, if the NYA count is correct.
Again, the top could be in place, but I view that as somewhat less likely at the moment. Closer examination when I have more time could change that opinion.
In either case, what gives credence that the next top will be major, and that this whole move is an a-b-c (assuming the triangle is correct in NYA), is the fact that triangles are almost always b-waves or 4th waves — and it’s clearly not a fourth wave. Triangles are almost never 2nd waves.
In conclusion, this is something of a game changer. The short-term hasn’t changed much — it still appears most likely to me that the market will make another new high. However, that new high should mark a major top, and the next trip will be a test or break of the October lows.
It is also possible that the turn is in already — but based on RUT and NYA, the pattern still looks incomplete.
I have to re-work a lot of charts later, but these are my preliminary conclusions based on what I’ve been able to examine — and based on what my gut has been telling me for a while. Until tonight, though, I couldn’t figure out exactly how to fit all the puzzle pieces together. Now they fit. Trade safe.
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