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SPX, COMPQ, Eur/USD Updates: Today Could be a Critical Day

Today could be a key day toward gaining more confidence in one of the two main counts, because — as those of you who own digital watches already know — today is the first of May.  The first of any month is frequently bullish, since there’s often a big bag of fund money moving into the market. 

If the bulls are able to show some strength today, it’s probably time to start betting on the alternate count.  Conversely, if the bears can keep control, then the preferred count will gain a bit of a confidence boost.  There are two main reasons I remain in favor of the more bearish count, and I’ll outline my reasoning in a moment.

Yesterday’s decline appeared impulsive, meaning it appeared to complete a five-wave move.  So there might be a small bounce, but if that was wave a or 1 down, it should be followed by more selling.  A material break of 1394 should get the ball rolling. 

Conversely, if bulls can take the market back above the recent 1406.64 print high, then the alternate count is probably unfolding.  I’m inclined to favor the alternate if new highs are made today, because that would then mean the market was up 6 out of the last 7 days, which is often (not always, of course) indicitive of a more meaningful bottom.  So if new highs occur, the favored odds shift to the bulls — but currently the odds still remain with the bears.

As such, on the chart below, the blue count is still the preferred count, and suggests that the entirety of the recent rally is part of a corrective structure, which will be followed by new lows. 

The alternate count would view the recent lows as a base from which a larger five-wave rally will unfold.  As I said, I think tomorrow will go a long way toward adding confidence toward one view or the other.

One of the reasons I remain in favor of the rally being corrective is the Nasquack, which looks to have formed a clear five-wave decline.  That suggests that another five-wave decline will follow, though it does not preclude further sideways corrective action first.

The Nascrack also looks like a small impulse down, to be followed by new short-term lows after any bounce completes.

As a refresher, here’s what the big picture looks like.  There are already targets for each count, but no confirmation.   As I’ve been stating, I continue to feel that the preferred count is slightly more probable.

Yesterday I mentioned that the Euro/US dollar currency pair is trading just beneath intermediate and long-term resistance levels.  If it does break out here, then equities bears are probably going to need to come to terms with the alternate count.  But again, odds here favor that it won’t break out, since it’s facing dual resistance — and since it’s formed a descending triangle, which leads to a bearish resolution 64% of the time. 

A descending triangle indicates that sellers are coming back into — and taking control of — the market earlier and earlier, which is why the peaks become progressively lower.  So sellers are getting stronger, while buying interest remains flat.

The Euro/Dollar chart is another reason I remain in favor of the more bearish equities count. 

However, 64% odds are just that — and there’s no rule to guarantee that the 36% odds won’t come to play on this particular occasion.  In either case, today’s action could go a long way toward telling us if the higher odds will take the intermediate-term prize, or if Uncle Ben’s loaded dice will once again guarantee that bears lose to the house.  Trade safe.

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