SPX for the smaller major-4 triangle or SPX to complete the double zigzag. Figure 1.

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1 Today s break -finally- below SPX2625 (and SPX2613) places the Ball now firmly in the Bears camp, albeit today s strong rally off the lows. And the two main bear counts remain the focus for now: SPX for the smaller major-4 triangle or SPX to complete the double zigzag. My preference is for the latter. Figure 1 shows the two short term possibilities the market has: today was nano-a and b of micro-c with 2570 (c=a) possible next. Given how extreme the put/call ratio is (0.76) I find this less likely, but a break below today s without moving over SPX2661 first means its correct. The other option is a possible ending diagonal, with wave-c completed, wave-d underway to SPX2640s followed by a last wave-e to SPX2580s. A move above SPX2661 will put this count into question. What is obvious is that the whole price structure is corrective over at least the past month. Keep this in mind while focusing on the bigger picture: major-5 is still to follow. And no, a 1, 2, i, ii setup to the downside is not what I am favoring either. It s what I call and view as bear porn that has never come true before either. A move back over SPX2683 will mean something else is going on. Because please remember we re still in a fourth wave, which still means there are only low probability setups as we can t trust the market much because it constantly hides its intentions to the very last minute and smallest wave degree Thus as usual: take your profits when you have them and run! Figure 1. SPX 1-min charts A) Micro-c of minute-c of minor-c of intermediate-c of major-4 underway B) Ending diagonal forming. 1 P a g e

2 The hourly chart shows the options we re dealing with (and as shown in Figure 3 yesterday), and price is still in the orange warning zone. From this chart it s obvious price indeed needs to move back above the SPX2685 level to be back in the greeen zone and tell us something else is going on. Note, however, how the MACD is starting squeeze : higher lows and lower highs. It means it will explode out of this pattern soon. A break higher: lows are in. A break lower: double zigzag to SPX2480 underway. That s how I view this setup. Figure 2. SPX hourly chart: Still in ornage zone. Major-4 triangle almost complete? Or still in double zigzag? MACD squeeze underway. 2 P a g e

3 The daily chart deteriorated further as price closed lower despite today s decent hammer candle. As on Monday price needs to follow up (move higher) on this potentially bullish candle to suggest it is ready to move higher even further. Other than that, price is still below its 20d SMA (SPX2657) and is still below SPX2670. The Bears keep delivering. The Technical Indicators are on a sell. But, there s possible positive divergence developing on the daily RSI5. Hence, bears are forewarned and please don t get slaughtered. As said: when you sit on profits please take em. Today s candle clearly shows there s still a bid in this market. Figure 3. SPX daily chart: Decent hammer candle off 200d SMA once again, but all TIs still on a sell and price is still well-below its 20d SMA, SPX2670 and the 50d SMA. 3 P a g e

4 Figure 4. Major indices daily charts: Still within their triangles As shown before, lets quickly reassess the state of the major indices using closing prices only. What s obvious is that despite today s intra-day drop, the S&P is still within its triangle and anything can (and will) happen while it s in it. Nothing has changed over the past 3 months. Still looks like a normal triangleconsolidation 4 th wave pattern to me. The same can be said for the NAS and RUT. The DJIA and NYA are in their own patterns, which with the new (blue) trendline looks much more like larger, slow moving ending diagonal patterns. Breakouts above these blue lines can be considered Bullish. Other than that, there s clearly no breakdown or breakout and thus the consolidation must be viewed, based on the current price action, as ongoing. 4 P a g e

5 The S&P500 s McClellan Oscillator (MO) ended today at -41, only down 5p compared to Wednesday, but it does mean the number of advancing stocks continues to be much less than the number of declining stocks: Bearish. The SPX-SI ([Cumulative] Summation Index of the MO) remains on a sell since yesterday. All SI s are now on a sell: Bearish. Thus, breadth is still very much NOT in the Bull s camp. On a positive note, the DJIA-MO ended almost at -80, which is viewed as the low risk buy zone. Hence, Bears are warned from that perspective. The CPCE (equities only put/call ratio) ended higher today at 0.76: elevated to extreme. Too many puts in place and the majority gets often punished. The VIX was firmly rejected at the 50d SMA today (see my tweet here) and thus remains in a longer term uptrend (>200d SMA), but in short to intermediate-term downtrend. A close below $15 will be good for stocks. Bottomline: breadth is getting washed out and sentiment too bearish (also AAII reported few Bulls are left: 28% vs 38% normally: 9 th week in a row of below average Bullish sentiment) and a bounce at a minimum can be expected based on these indicators. Figure 5. SPX-SI remains on a sell.. 5 P a g e

6 In conclusion: The Bears were able to push below SPX2625 and SPX2613 to move price below SPX2600 intra-day only to see buyers step in once again. The preferred count is for a major-4 triangle to complete at SPX2580, with an ending diagonal c-wave now underway. BUT, if price breaks back above SPX2685 we ll have to consider alternate options, including the change of a major-4 low being in place. Breadth and sentiment are washed out and Bearish so shorter term a bounce can be expected. How to trade this? The bears followed through with a move below SPX2625 to signal SPX2580/70, but were only able to push price to SPX2595 so far. For now the easiest short-term trade seems to be the long side. Expecting a bounce to SPX2640s. A move above SPX2661 and especially SPX2685 is Bullish. Traders with stops below the 200d SMA were likely stopped out. ALOHA Arnout aka Soul, Ph.D. 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. 6 P a g e