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SPX and NDX Updates: Chart Noise Reaching Deafening Levels


If the bearish wave count is to play out, the bears need to make a stand, and probably can't afford to see the market trade more than a few points above SPX 1380.

MINYANVILLE ORIGINAL Yesterday started off looking quite bearish, but the S&P 500 (SPX) bounced off support and only closed down about 12 points. The market is still range-racing at the moment, and while it appears it may finally be setting up for a big move, there are a lot of questions as to the market's intentions over the short-term.

As discussed several times previously, I remain in favor of the more bearish intermediate position, but the pattern at present has become more than a bit ambiguous. Until bears (or bulls) claim some key levels, it's going to be difficult to predict this market more than a few hours ahead of time.

In this type of market, it's more important to pay attention to key price levels than it is to pay attention to the wave counts.

Please read that sentence again, and don't be surprised if things go differently than the numbers or letters on the charts suggest. The counts are far too noise-filled at the moment to be reliable -- breakouts or breakdowns are now needed in order to clarify, and I would doubt anyone who tries to tell you otherwise.

The first chart I want to share is the short-term Nasdaq 100 (^NDX). The recent decline could be viewed as an extended fifth wave decline, or as an abc decline -- one of these two interpretations seem to make the most sense, and the chart explains the reasoning behind the labels for a fourth or b-wave. Due to the noise level, it could also be viewed as a third wave with wave 4 up unfolding now, and wave 5 down still to come. As I said, don't invest too much faith into the short-term counts at the moment.

Last week's bullish trade trigger played out perfectly, for those who took profits when the target level was reached.

Click to enlarge

The next chart is a longer-term NDX, and I'm sharing this for discussion purposes only. It simply allows a glimpse into my reasoning as I wrestle with these ugly charts (for way too many hours lately) each night.

This chart is labeled bullishly, but I'm not favoring that count -- I'm simply presenting it to show readers why I'm not currently jumping up and down and yelling that the world is guaranteed to end tomorrow. I have never stopped favoring the bearish count (apparently there was some confusion on this matter last week), though I do frequently look for ways to poke holes in my own biases, and watch for things that might serve as warnings to re-examine the outlook.

Click to enlarge

The NYSE Composite Index (^NYA) is currently channeling. The first stronger confirmation of a bearish wave in progress will come with a solid breakdown from the red base channel.

Click to enlarge

The SPX intermediate chart shows that the preferred count has so far played out very close to perfectly, though as noted did fall about 11 points shy of the "ideal" target.

Click to enlarge

The SPX short-term chart is below, and is just as ugly as all the rest. There's a bearish sell trigger outlined, but do note that the expectation of that trigger has been adjusted recently to suit the current chart.

Friday's breakdown from the short-term black up-sloping channel served as an early warning to bulls that the uptrend had ended.

The 1390 target for the wave counts is getting close to falling off the table as well, and as I stated yesterday, it appears that the bear count likely peaked at 1380, which is 10 points shy of the target zone. I continue to view 1380 as the stop zone where the intermediate bear count would need to be completely re-examined. Unless and until that level is claimed by bulls, the bear count remains favored.

Click to enlarge

In conclusion, if the bear count is indeed unfolding, then the SPX should probably not trade markedly above 1380 going forward, and the bears need to start claiming some key levels and holding those levels. Claiming 1340 +/- on a closing basis would be a good start. This is the best chance bears have had in some time, so it would appear the game is now theirs to lose. Trade safe.

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