The market did very little on Wednesday, which is actually a somewhat encouraging sign for bears. To some degree, one can gauge who’s in control by simply looking at which price direction the market is stuggling to advance. The move down off the recent high was fast and easy — but, especially on Wednesday, the bulls struggled to regain that ground and didn’t get too far. This suggests that the bears remain in control, at least for the short term.
This further suggests that the preferred view from the past couple days, of at least one more leg down, will probably come to pass. The bigger question is whether there will be a new high after that leg. I remain in favor of the idea that the market is in the early stages of an intermediate trend change, but until there’s confirmation, there are no guarantees.
Again, I feel the real test will come at the recent breakout levels for this indices. It’s premature to be overly bullish or bearish until there’s a backtest of prior resistance, to see if it’s become support. What happens from there should tell us future market direction with a high degree of certainty. Of interest: the Trannies have, so far, failed that backtest; NYA is approaching its backtest; and most of the other indices haven’t reached that prior resistance zone yet.
For the short term, as discussed, it still appears there’s at least one more leg down coming. The zone to watch for a potential bounce is 1380-1391 SPX. If the market can break through there and take out the prior wave 1 high, that will rule out the fourth wave. The alternate bullish count, which envisions the possibility that this is wave 2 of (v), cannot be ruled out until the prior wave (iv) low is traded beneath. I continue to give that bullish count low odds.
I also wanted to update the RUT chart, which continues to present a very nice bearish trade trigger.
And I wanted to update the Chevron (CVX) charts, previously published in this article, where I called a top in Chevron (note, the linked article contains several additional big picture charts). Chevron has broken down from its presumed ending diagonal, and if this count is correct, should make a rapid move down over the next couple months.
The chart below shows the rough path expected to be taken by Chevron. Note that the chart below is not intended to be time-accurate, merely a rough guideline as to the expected price movement.
In conclusion, things continue to appear promising for the bears, at least over the short term, but there is as yet no confirmation of any meaningful trend change. If the preferred count is correct, then a top is either in place — my “margin of error” count says there could be one more new high. I do expect this is the end of the road for this rally one way or the other. In the meantime, there are some trade-able short term patterns presenting themselves — also, in a perfect world, the Creative Article Title Fairy will leave some nice new titles under my pillow tonight. Trade safe.