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Jason Haver: Intermediate Upside Potential in SPX Still Appears Limited


The wave counts suggest limited upside potential, and indicators are beginning to generate top signals.

Markets like this can make it a challenge to keep the updates interesting and not overly repetitive, redundant, and redundant. There's very little to add on a material level -- in fact, I considered simply republishing the last update, but I accidentally spilled coffee on it.

Big picture, the S&P 500 (INDEXSP:.INX) still appears to have fairly limited upside potential. In Elliott Wave Theory, five waves form a complete fractal, at which point a trend reversal becomes higher probability.

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The near-term is ambiguous -- if the bear count is in play, then the top is probably in. If the market is going to form five waves up for the fifth and final wave at higher degree, then it needs another small wave up. At higher degree, both counts are basically bear counts, since the wave patterns suggest upside is limited. From a classic TA perspective, that expectation may not fit with the potential cup-and-handle double-reverse v-bottom "papa bear, my soup is too hot" pattern, as it's sometimes called (when I'm trying to keep the updates interesting, anyway). That pattern potentially targets 1900-1910 -- so if there's a breakout with increasing momentum, then the wave counts may need to be revisited. Presently I'm not anticipating that result, but any new signals would need to be respected as and if they occur.

There are two ways to view the current price action: Bulls would say SPX is consolidating the recent rally; bears would say SPX is retesting a resistance zone (the all-time high). Both descriptions are accurate, yet one of them is more correct -- pick your poison.

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The Dow Jones Transportation Average (INDEXDJX:.DJI) Unexceptional and Mediocre required some minor adjustments after the expanded flat count found a bottom at the previously noted inflection point:

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In conclusion, this market may to be trying to lull everyone to sleep. I'm suddenly reminded of an old cheesy and cliche movie line: "It's quiet out there. Too quiet." It seems like most everyone is expecting new highs at this point, but, personally, I have very little desire to buy SPX near the all-time high, and I'm starting to see topping signals appear on some of my indicators. Unless and until there's a convincing breakout, short -- or stand aside -- look like more reasonable positions to me. Trade safe.

Follow me on Twitter while I try to figure out exactly how to make practical use of Twitter: @PretzelLogic.

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No positions in stocks mentioned.
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