For the past couple weeks, I've been yammering on about how the stock market has reached an intermediate inflection zone. After digging around my chart book for a while, I found an index which illustrates this as well as it can be illustrated.
So we'll lead off with the Wilshire 5000
(INDEXNASDAQ:W5000), which basically represents the entire market. Wilshire's chart has a couple interesting features:
1. The recent peak hit the perfect confluence of two long-term channel lines.
2. The wave can be counted as a completed five-wave move, complete with a key intermediate level to help sort out the bull/bear propositions.
I've outlined both sides of the trade on this chart. We probably have to give the edge to the bears, considering the long-term trend. In the event bears are too busy getting beaten up by the tag-team of Ben Bernanke and Janet Yellen to step up to the plate and the stock market breaks out over that confluence, then we'll have to consider that we're likely unwinding the more bullish count.
Click to enlarge
Stepping down a time frame, and shifting over to the S&P 500
(INDEXSP:.INX), there have been a couple interesting events since my last update.
1. The market turned less then two points shy of the noted 1777 Fibonacci price level.
2. Thursday's rally attempt was strongly rejected at the intermediate trend line.
Click to enlarge
Looking at the near-term, the odds look good for new lows. The only thing that gives me even the slightest pause is the beating most near-term bear counts have taken all year. The Fed has become the Earl Scheib of the equities market:
"We'll print over any pattern for only $99.95*!"
*Prices are shown in trillions of dollars
Click to enlarge
In conclusion, bears have so far turned the stock market where they needed to in order to keep hope alive for the intermediate term. That said, bulls haven't given up any key levels yet, so we have a battle on. If the near-term pattern plays out to normal expectations, we should still see lower prices in the coming sessions. Trade safe.
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No positions in stocks mentioned.
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