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SPX and Dow Updates: Dow Triggers a Warning Signal

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

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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.

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

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