Figure 1. SPX 60-min chart. Ending diagonal triangle forming, a set of nested 1,2 waves; or simple 3 waves down off SPX2800 to complete major-a?

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1 In the weekend update I was looking for lower prices, and lower we got, but price did also close higher, i.e. above Fridays close. Another Bullish reversal candle? We ve seen plenty of these one-hit-wonders recently (last Thursday being the prior) and so we really need to see follow through the next day. Or otherwise, as the saying goes one swallow [a migratory bird] doesn t make a summer. Today s reversal does -once again- change the options we have on the table. Sorry for the constant adaptations, but these are corrections within a non-linear market: it constantly evolves and morphs into a final product. Impulse waves can only follow one path, corrections many. All we can do is deal with it: anticipate, monitor and adjust if necessary. Based on the INDU and RUT (see pages 4, 5); market breadth, as well as the analogy with 2011 (page 3) I see the following options in order of what is IMHO most to least likely: 2 nd most Bullish option; an ending diagonal is forming, with one stab lower to SPX2550/40 to complete major-a before the major-b rally starts The most Bullish option; major-a low is in. 3 rd least Bullish: the c-wave down is subdividing into another nest of 1 st and 2 nd waves. Figure 1. SPX 60-min chart. Ending diagonal triangle forming, a set of nested 1,2 waves; or simple 3 waves down off SPX2800 to complete major-a? How do we know which it will be? Simple! A move above SPX2710 takes options 1 and 2 off the table. A move below SPX2583 takes option 1 off the table. 1 P a g e

2 On the daily chart, price found support at the horizontal SPX2580 level and reversed back above the critical SPX2600 level. But, the pattern of lower lows is continuing and not until that is reversed is the price action Bearish. In addition, price is below most resistance levels as well as still below the 20d to 200d SMA. Although the Bulls can hang their hopes on the fact that today s candle was similar (called a Pinocchio candle) to the one at the February lows earlier this year, one reversal candle doesn t make a new trend. So, we need that follow through, which in turn will also cause the technical indicators to move back up and switch to buy. Figure 2. SPX daily chart. SPX2580 held as support and Bulls were able to close price back inside the uptrend channel and above SPX2600. Plenty of overhead resistance left though before calling victory. Similar 2 P a g e

3 The other possitive the Bulls can hope for is the continued similarities betweent the 2011 lows and the recent price action in that back then there was a 1 day washout and then reversal back inside. Fig vs 2011 fractal still valid!?. Similar small stab lower and reversal!? 3 P a g e

4 The third positive is the fact the DJIA pretty much reached the typical c=a extension at today s lows, which also came to a GANN retrace level (off by 100p). But with price still below the 20d to 200d SMA and all three SMAs sloping down the price charts is painting anything but a Bullish picture for now. Figure 4. DJI daily chart. Bullish reversal candle from around c=a and GANN retrace levels, but price is below its 20d to 200d SMA: Bearish setup. 4 P a g e

5 The fourth positive -for the Bulls- is the fact the RUT also pretty much reached the typical c=a extension at today s lows. But that s all they have so far, and price can easily extend lower especially since also here price is still below its 20d to 200d SMA and all three SMAs are sloping down with the 20<50>50. That s a Bear market chart, and any further advance in price should be regarded as a bounce. I am not going to do any major-b price targets yet as I ve no confirmation major-a is in. Hence, the burden off proof is resting on the Bulls now. Figure 5. RUT daily chart. Bullish reversal candle from around c=a, but that s all we have for now, while price is below its 20d to 200d SMA: Bearish setup. 5 P a g e

6 Today market breadth -per the McClellan Oscillators (MO)- closed in general flat one could say. For some indices it was up, for others down. See table 1. All the MO s FSTO indicators are therefore still on a sell, while the Summation Indices (SIs) are turing to sell. In fact the DJIA-SI is now on sell (See table 1). The 1-min TICK had eleven <-800 peaks today and ten >+800 registered peaks (max reading +1343, min reading Thus, the Bulls were slightly favored today; inline with the MO readings. But, the put/call ratios dropped to 1.07 and today. This means there s still no fear (etremely high) levels; which however is often seen at or close to important lows (as shown in the weekend update). Figure 6. SPXSI daily chart. About to give a sell cross, but can be as unreliable as the recent buy signal DJIA-SI is now on a sell. Bottomline: Albeit yet another strong close the SPX, DJIA, RUT continue to make lower lows, while the NAS and NDX are showing relative strength. In addition today s candle can be considered a reversal candle, but we need to see follow through with more upside tomorrow or else the pattern of lower lows and highs simple continues. It appears an ending diagonal is forming with a break below SPX2583 targeting SPX I ve no buy signals anywhere while market breadth is OK but not great. Meanwhile put/call ratios continue to signal complancy, not panic. Thus with price on all indices below their downsloping 20d to 200d SMAs the charts continues to signal weakness and the burden off proof is therefore with the Bulls. A move above SPX2710 without moving below SPX2583 first means major-b to likely SPX2800+ is underway. A move below SPX2583 targets -as said- SPX P a g e

7 Table 1. Buy/Sell Signals based on Summation Indices. Table 2. Buy/Sell for the Exchanged Traded Funds (ETFs) SPY & SH and performance (intermediate- and long-term only) based on mechanical trading system. Short-term and intermediate-term is now available on my private twitter feed. Aloha, Dr. Arnout, aka Soul, ter Schure 2018, Intelligent Investing, LLC. This copyrighted daily periodical is published on most stock market trading days by Intelligent Investing, LLC, and is intended solely for use by designated recipients. No reproduction, retransmission, or other use of the information or images is authorized. Legitimate news media may quote representative passages, in context and with full attribution, for the purpose of reporting on our opinions. Analysis is derived from data believed to be accurate, but such accuracy or completeness cannot be guaranteed. It should not be assumed that such analysis, past or future, will be profitable or will equal past performance or guarantee future performance or trends. All trading and investment decisions are the sole responsibility of the reader. Inclusion of our information for trading and investing are the sole responsibility of the reader and cannot be construed as any type of recommendation, nor solicitation. 7 P a g e