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SPX, INDU, and BKX: Can We Draw a Conclusion From These Fractured Markets?


Three important markets have fractured.


Another market that has now gone its own way is the Dow Jones Industrial Average (INDEXDJX:.DJI). INDU made a new high yesterday, and SPX often follows suit. So we have BKX, SPX, and INDU each doing their own thing. SPX presently seems to fall right in the middle of the two, so hence my conjecture that a retest or marginal new high followed by a decent reversal is in the cards. This proposal actually matches the INDU count quite well, as the present rally leg does appear to be the final fifth wave in INDU's series.

INDU's rally is presently corrective (an ABC), and has not yet formed five waves at micro degree.

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The long-term INDU chart notes the approach of the previous all-time-high. If INDU clears 14,200, then there is simply nothing left as far as horizontal resistance, so we have to watch theoretical overhead resistance levels in the form of trend lines/channels, etc..

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Another ratio I track is SPX:TLT, and this ratio gave a warning signal a few weeks back. I didn't publish it at the time because my other indicators weren't yet validating it. I think it's time to pay a little more attention to this now, though please be aware this doesn't necessarily argue for an "end of the world" type decline -- but it does suggest that what we've seen in SPX so far may be only part of the corrective picture.

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In conclusion, I may be a little early warning about these signals since it's entirely possible that a fifth wave rally is underway in SPX and that will take us up to new highs rather directly. However, I wanted to emphasize that things are not as clear-cut as they may appear. Ideally, one or more of these signals will clarify in the next few sessions. Trade safe.

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