SPX has still not fulfilled the 2 criteria to confirm completion of the triangle and a new downtrend: clear rejection of the 200SMA and a break below 2044. Technically, the 3-week triangle I marked as possibly complete at 2105 has not been violated, but the drop to 2052 and rally to 2103 look like 3-wave moves not indicative of a triangle breakdown and thus probably just expanded the triangle. Since the Tuesday 2103 high, the 2103-->2071 and 2096-->2078 drops both seem to be reasonably counted as 5-wave moves with the interim 2071-->2096 rally appearing to be an ABC with sharp wave C. In summary, SPX has not met my criteria to confirm a downtrend to our expected initial 1922-1951 target area with an interim pause at 2020/2040, but it has little room to gyrate any further and has begun what could be impulsive moves down with confirmation imminent.
Although I am playing the bearish outcome, there are a few factors that could allow the market to go sideways a couple-few days longer. There had not been SOS or BOW days for a little while until yesterday's sizable BOW. And, OPEX looms Friday with max option pain near 2090-2100. Also, the 200SMA and TRIN=1.5 could provide support. Having said that, SOS/BOW signals are not perfect and are probably due to be wrong as they have almost-too successfully foretold the gyrations recently. And, I've often commented that OPEX max pain is often reached around mid-week before OPEX and then the last couple days run away from it (usually upward but either direction). Also, put/call ratio, bearish moving average alignment, RSI, Stoch, MACD and other indicators support much further downside. In summary, there are technical factors that could support further SPX gyrations below 2100ish but they are not oversold enough to prevent the 8-10%+ downtrend that we've been expecting for longer-term indicators and SPX is in a VERY precarious position playing with fire perhaps too many times.
The top 5 largest SPX down days in the last year from previous close to low of day fall in the 38-44 point range. Many other dayss fell in the 30+ range. We are at risk of seeing a top 5 down day. From SPX 2080, that coincidentally would land at 2036-2042 which is first critical support. Although it is possible SPX makes a large bounce from 2040ish IF such a big down day occurs, I could easily see a few hours of 5-10pt gyrations in that area followed by the next day dropping to my 2020ish target. If that occurred, we'd appear to have some wave 1-2-1-2 action today, wave 3 action tomorrow and then wave 4-5-4-5 action Thu/Fri/Mon. Of course, Mr. Market could delay that scenario, but its ability to escape such high-risk scenarios has been getting weaker and weaker in the last 9 months. Good fortune.
P.S. Futures were up when I posted last night but have been down 10-20pts this morning. Perhaps I am getting too detailed, but I can envision SPX bouncing slightly at 2064ish because 2103-->2071=2096-->2064 and there was a recent pivot at 2064. However, if SPX is beginning 3 of 3 down, it will only bounce weakly perhaps not even above yesterday's 2071 low. If SPX is nesting further 1-2-1-2 waves (or not following my script at all), it will bounce well above 2071. Either way, assuming the bear scenario plays out, I still expect brief resistance at 2040ish and a strong bounce from 2020ish, but I can now see reason for a small bounce at 2064ish. Good fortune.
P.P.S. Well, we got a bounce 2060-->2068 but for a shorter time than even I expected. Now that I've seen SPX fall near 2050 so far, it appears we may actually be completing a 4th 5-wave drop (2103-->2078, 2096-->2070, 2086-->2060, 2068-->2050ish?). That looks like a 1-2-i-ii-iii-iv-v. But, does that make a 1-2-3 or a 1-2-1? I suspect SPX will work its way down to first serious support at 2040ish and leave everybody wondering whether it has completed a 1-2-3-4-5 or a 1-2-1-2-1? After a small bounce from there, we'll find out...either SPX will rally convincingly back above the 200SMA or it will fail again before giving us a final conviction test at 2020ish and the final cascade to 1922-1951. That's how I see things at the moment. Good fortune.
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