The charts are an absolute disaster right now. I’ve looked at roughly 20 million charts this weekend, but there are so many possibilities, it simply becomes confusing to try and cover them all. This update was a whole lotta work for very little tangible reward. I looked at everything from NDX and COMPQ to SPX, INDU, BKX, and TRAN — but there’s nothing that jumps out as “this is the one!”
The market keeps us guessing at times, and this is one of those times. At times like this, it’s sometimes better to zero in on other indicators, such as trendlines and so forth.
I think one of the key trendlines right now is visible on a longer-term chart, and it’s not too far below the current market. If that red trendline breaks, the market could start the next big leg down. If it doesn’t break, the market should continue to bounce higher.
As I mentioned, there are literally too many options to list — so I’m going to present my “best guess” short-term outlook and if it works, it works; if not, so be it.
First off, it does appear that the SPX formed an impulse down on Friday, so I would expect a bounce (which may have ended already, into Friday’s close), followed by another impulse down.
Backing out a few degrees, here’s what the best-guess counts looks like. Again, if the market materially breaks the trendline mentioned in the first chart, then all bets are off for the more bullish count. The bearish option is a very wild flat for wave (2).
The market has never allowed us to rule out the alternate wave (iv) count (meaning the last decline could have marked the bottom of wave (iv)). The INDU has shown more strength than the other indices of late, and the potential exists that it’s forming an ending expanding diagonal fifth (and final) wave. This option is shown below, and would jive reasonably well with the SPX triple-zigzag bullish count shown above.
The other option, of course is that wave (ii) completed at the recent high.
Interestingly, the NDX looks like the weaker sister, no doubt due to Apple’s recent fall from grace. Unfortunately, this chart presents much the same mess as everything else, though possibly more so. However, the alternate count in NDX calls for a rally almost immediately there, so what happens Monday should be telling.
It’s always possible for NDX to decline while INDU/SPX rally, especially if funds decide to rotate out of tech and into blue chips.
A factor that’s always worthy of attention is the upcoming Ben Bernanke Beard Expose, which occurs on Wednesday, though tickets went on sale last week. Thanks to my new beard, I’m able to get in free as an exhibitor!
Anyway, at 12:30 on Wednesday, the FOMC announcement takes place, during which Ben will tell us about all the “tools” the Fed has at its disposal — including hammers, screwdrivers, and their latest addition: a belt sander. He’ll also probably tell us “no QE3 today!” So maybe that’s what the market’s waiting on before it starts the next serious leg down. The more bullish “best guess” count would fit a potential rally into Tuesday/Wednesday, so we shall see.
In conclusion, there’s too much clutter in the charts to make a strong call right now. I’ve done my best to present what appear to be the “most probable” short-term options, but still could very well be completely off, since I can literally count at least 7 other potentials without really trying. We’re simply going to have to see what happens over the next couple sessions to allow the short-term options to be narrowed down a bit, unless one of the two presented works out.
In either case, it still appears quite likely that the whole rally is corrective, and should ultimately resolve with lower prices. Trade safe.