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The Importance of the Market's Long-Term Inflection Point

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While the bulls still appear to have control, this update discusses some key price zones for the long-term.

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Friday's update noted that the market was approaching an inflection point, but expected that the S&P 500 (INDEXSP:.INX) had at least one more fourth wave correction and fifth wave higher still to come, which the market fulfilled on Monday. The short-term charts are in a bit of flux at the moment, so I'll discuss the short-term later in brief, but I want to focus on the longer-term in this update. In most recent updates, I've talked about the long-term bull potential, which I'm still favoring. I should probably make it clear that I'm not flipping the bear side here, but nevertheless, I do want to bring a bit more balance to the discussion.

I want to start off with a chart that does a reasonable job of highlighting the long-term importance of the current inflection point. The Philadelphia Bank Index (INDEXDJX:BKX) has broken out and back-tested a bullish basing pattern, and is now in a critical long-term resistance inflection zone.

The problem for bears is that this chart simply isn't bearish -- it has bearish potential; but it's important to understand the difference.


Click to enlarge

The chart below zooms in a bit on BKX and discusses the likely wave structures and targets. While BKX has loved blow-off tops of late, I have to favor the more traditional market pattern, which is that the strongest waves usually fall closer to the middle of the pattern -- thus suggesting further upside is still out there after the next correction.


Click to enlarge
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No positions in stocks mentioned.
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