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SPX and INDU Updates: Rally Due for a Breather?


Monday's potential turn level stopped the rally -- in this update, we'll look at price levels that should help signal if the correction will continue deeper.

MINYANVILLE ORIGINAL Monday's update expected the S&P 500 (INDEXSP:.INX) to head toward the 1426 +/- level, and noted that price zone should be watched for a possible turn. SPX reached nearly 1424, and then reversed into a 20-point decline. That decline does appear to have been impulsive, but there are presently two equally viable ways to fit that impulse into the surrounding structure, as shown on the chart below. The chart also notes a pending bearish sell trigger if the market sustains trade below 1403.

Click to enlarge

This has been a pretty sloppy market for the last couple sessions, and try as I might, I cannot yet reconcile the rally from 1385 as an impulse wave (a five wave move). This means it's either incomplete and will head to new highs (black, below), or it's the b-wave of a larger expanded flat (shown below in blue), which will culminate in a decline toward 1384 or lower. Sustained trade below 1400 would more strongly favor the expanded flat.

Click to enlarge
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