SPX and Dow Updates: Dow Triggers a Warning Signal

By Jason Haver  DEC 04, 2013 10:21 AM

The Dow has added its own signal to Monday's warnings, plus some patterns to watch over the coming sessions.


There is no training, classroom, or otherwise, that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market.
-- Paul Tudor Jones
In Monday's update, I noted that November's 1809-1816 target had been captured, and warned that a larger correction appeared likely. Later that same day, the S&P 500 (INDEXSP:.INX) even presented longs with a second opportunity to exit within the target zone before dropping below 1800. The market has continued to follow the expectations of last month's preferred wave count, and today I have some added signals and potential targets. I'll let the chart annotations do most of the talking today, so we'll start with the SPX three-minute chart and build from there.
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Now that there's more info to draw from than there was during the weekend (Monday's update), I can provide a bit more perspective on the SPX 30-minute chart. Note the potential head-and-shoulders top under construction. The alternate count has to at least be considered, for the moment anyway, since this is not yet a clearly impulsive decline – however, a new low would give it a much more impulsive appearance.
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The Dow Jones Industrial Average (INDEXDJX:.DJI) notes an interesting warning pattern that has formed in RSI and MACD.

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In conclusion, if this decline is indeed part of the anticipated higher-degree fourth wave correction, then it should be at least two legs in depth. A new low from the current leg would go a long way toward confirming that outlook. Trade safe.

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No positions in stocks mentioned.

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