WOW, who would have known?! Price went from my upper target zone to my lower (see page 2) in just 11 trading hours: The S&P500 lost ~10p/hour Crazy. Big gap ups one day, followed by a 100p drop the next are the hallmarks of a Bear Market, not a Bull. If you therefore struggle in your trading, please contact me ASAP. In addition, a word of advice: when in a Bear market and my Elliot Wave Count suggests either down or a few more subdivisions marginally higher -as outlined yesterday (!); it is best to get out of the markets when long because Bear Markets prefer down, not up. Don t try to milk those possible last few points. Not worth it. That s said, yesterday I found the truth lies between A) either intermediate-a has topped especially with the 26.8p pullback (>25p!) seen today, or B) there may be a few more subdivisions higher until it tops. It is this price ambiguity from November 23 through 28 that makes defining the exact subdivisions very hard. Thus, SPX2820 can still be reached as long as price remains above SPX2750. Well that >25p pullback was the correct line in the sand, and once the S&P broke SPX2750 the water fall decline started in all earnest (Fig 1). There are now a nice 5 waves down, which means we should get a 3 wave bounce up to ideally SPX2745 +/-5p, NAS7275-7355 before the next leg down to ideally SPX2680-2660, NAS7000-6925. These five waves down present us with another more bearish option, which I present on page 2. Figure 1. A) SPX 1-min chart. 5 waves up complete at SPX2800, now 5 waves down to SPX2697. B) NAS 1-min chart. Similar EWT count. The final 5 th wave can still extend lower, but it is not necessary. A B 1 P a g e
My preferred view is that intermediate-b of major-b is currently underway, see Fig 2A, and today s decline is minor wave-a of -b, which should then become a 5-3-5 or 5-3-3 correction because wave-a was five waves down as we saw in Fig 1. The open boxes show the next waves target zones, while the shaded boxes show my previous calls and how price reached each of them. Enough chest pounding, the five waves down from SPX2800 to SPX2697 does provide us with a new option, in that it could be the (grey minute) 1 st wave down of a final (green) minor c-wave to complete major-a: see Fig 2B. This count will become operable on a break below SPX2630 without moving above SPX2800 first. It also means the prior SPX2630-2800 rally was not 5 waves up, which would not surprise me given the ambiguous price overlap November 23-28. Depending on the c-wave s Fib-extension, the ideal target zone is then SPX2545-2500. IF we are dealing with a wave-i down, then a standard Fib-based wave-ii (50% retrace), -iii (1.618x i), -iv (1.00x i) and v (v=i) relationship targets SPX2540 (dotted arrows). So, I ll monitor this option closely going forward. Figure 2. SPX daily chart. A) Preferred Elliot Wave count with price target zones. B) Alternate Elliot Wave count with price target zone, which comes into play on break below SPX2630 and first serious warning on break below SPX2660. How to trade the different options succesfully? One stratgey could be to A) long the anticipated bounce to SPX2745ish, B) reverse trade for the anticipated drop to the SPX2680-2660 target zone, set stop loss according to personal risk tolerance; C) if my assessment is correct, then sell ½ of the position when price reaches the target zone. D) set a stop at just above entry to protect remaining position s profits. E) If the market does decide to move to SPX2540 you re still in for the ride WIN WIN either way. 2 P a g e
What a difference a day makes. Albeit yesterday the daily chart of the S&P500 showed a doji: not enough buying power to stage a rally any more than the gap up. price was able to recoup the 50d SMA as well and [was] above the 20d SMA to 200d SMA, thus technically the short- to long-term trend [were] now up. The Bollinger bands are expanding, showing upward price strength and all the technical indicators are on a buy. All would like to see higher prices; which would fit with the alternate count (Fig 1A, 2). But, I also found the RSI5 is now getting overbought, suggesting that this bounce is likely to end sooner than later based on prior bounces (see red down arrows). Well, this rally clearly ended much sooner, not even allowing for a nice negative divergence on the daily RSI5, and price fell below all SMAs (20d to 200d) and the A.I. now gave a non-ideal sell signal (non-ideal because not all 3 indicators (colored lines) that make up the A.I. made it above 80). Price did find support at the lower support zone, but resistance is now at all SMAs and SPX2740-2760. Figure 3. SPX daily chart. What a difference a day makes. From decent Bullish to outright Bearish in just one day... 3 P a g e
The RUSSELL2000 (RUT) has mostly lead the major indices higher since the Bull started in 2009, and is now leading them lower. Tell tale of the Bull is over!? Now the RUT has almost entirely retraced the recent two week rally in one day, and a break below the mid-november low, will tell us the other major indices will likely follow and the Elliot Wave count shown to the black major-a target zone is operable (my alternate EWT count shown in Fig 2B). Figure 4. RUT daily chart. This index keeps leading markets lower, just as it lead markets higer for many years until September this year. Thus a move below the mid-november low will tell us my alternate EWT count is operable. B 4 P a g e
Today market breadth -per the McClellan Oscillators (MO)- closed lower on all indices. See table 1. In addition, the 1-min TICK had seventeen <-800 peaks today and only two >+800. Thus, the Bears took over. The NDXMO s high reading from yesterday was indeed the fly in the ointment as those overbought levels continue to tell (local) tops are being formed. All the MO s FSTO indicators gave a sell cross today. But, the Summation Indices (SIs) for all major market indices remain on a buy as breadth per the MOs was still positive (See Fig 1B and table 1). The put/call ratios (CPC and CPCE) ended at 0.95 and 0.69 today; respectively. Indeed, as said yesterday the Bullishness over the short term prevails, and could require some downside to cool it off first. Well, cooling off we got today Figure 6. A) NDXMO daily chart. Overbought lead indeed to another drop. B) SPXSI daily chart. Still on a buy, as are all other indices SI s but starting to level out at overbought conditions. Bottomline: Yesterday I concluded The charts are giving some mixed signals; there s still room for more upside, but price and breadth is already getting overbought enough from where a pullback can occur at any moment. As long as the S&P500 remains over SPX2750 we can allow it to reach SPX2820s but with today s >25p pullback, and lower close than open, odds have increased for the intermediate-a high to be in. In that case intermediate-b should target SPX2715+/-20p before intermediate-c targets SPX2905-2865. Well, those mixed signals are now over as SPX2715+/- 20p was already reached today. That was fast, but with the 5 waves down from SPX2800 to today s SPX2697 low, this does add a serious possibility for the S&P to reach SPX2540-2500 after a bounce to SPX2745ish. 5 P a g e
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. 6 P a g e