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SPX, INDU, RUT, NYA: Market Wants a Debate


The bears are demanding equal airtime...

MINYANVILLE ORIGINAL In keeping with the spirit of election season, the bears have decided it's time to open a debate.

On Tuesday, bears broke the market down through some key trendlines in several markets. The analytical challenge I'm running into remains the same as mentioned last update: there are a lot of mixed messages being conveyed by different markets, and it's difficult to find a pattern that holds across all of them.

The one market that has largely convinced me that higher prices are still ultimately coming is the Dow Jones Industrial Average (INDEXDJX:.DJI). I can't get past the three-wave rally into the new high, which suggests the final high isn't in yet -- and this is a pattern I've learned to never ignore. It doesn't work 100% of the time -- nothing does -- but it does work the vast majority of the time. The main question has become how deep the correction will run, and as I suggested on Monday, wise bulls probably wanted to get out of the way once that lower red trendline broke.

I can now count five clean waves down into the recent low. Where I'm most unsure is whether those five waves form wave 3 of c, or ALL OF wave c. On the chart below, I've drawn-in the potential for wave 3 of c, with a fourth and fifth wave still to come -- but there really isn't a clear answer.

Click to enlarge

An interesting fractal study I want to share is General Electric's (NYSE:GE) pattern of March-June 2012 in comparison to the current S&P 500 (INDEXSP:.INX).

Click to enlarge
No positions in stocks mentioned.
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