SPX Long Term
My preferred wave count is similar to the idea I posted some weeks back on the DAX and that I suspect the SPX is inside a 5th wave for an ending diagonal so likely to chop higher into Jan-Feb period next year before a meaningful high. It would need a seriously strong break below the 200DMA on the SPX before I would switch to an alternative bearish idea, whilst this market continues higher I still prefer the bullish option over the bearish option.
Although I am certainly no perma bull and calling for SPX 2000 or anything like that, recent price action over the last few days suggests the market is simply correcting the advance from the Nov 2012 lows and likely to push higher once the correction has finished.
When you look at other US markets we can clearly see the same sort of shape, especially markets such as the NYSE. The last decline from the September 2012 highs was a 3 wave decline as we can clearly see the NYSE is pushing higher as I suspect it would, but is lacking the new high it needs to complete its idea.
So whilst both patterns suggest more upside I remain bullish on this market and looking for those new highs, it would need to impress me with some serious aggressive downside price action before I am convinced this market is bearish.
Although I do have an alternative bearish idea that I am watching, with the seasonal bias upon us now the markets tends to float higher due to the low liquidity levels and I suspect this will help the US markets reach their respective targets. I am not ready just yet to give up on this market making new highs.
I am not convinced by the bearish case, that the bears are presently using has any merits, simply because I see other markets that are presenting better alternatives which are more representative of the current price action.
Most of the European markets have exceeded their respective September 2012 highs, which technically completes the DAX idea I present to readers a few weeks back. But with the US markets lacking that new high I am going to stay with the trend and give the benefit to the bulls to push the SPX towards 1480-1500.
Having hit our target range between 1420-30SPX on Monday we went into this week looking for a high and a pullback towards 1390SPX before the resumption of the trend should push the SPX higher.
Well Monday gapped up into resistance and set the scene for a decent pullback which we could sell.
It turned out to be a decent decline as it almost tagged its 1st target at 1400SPX the low came in around 1403SPX. So the idea of a 2-3 day pullback appeared to be working well.
However like all corrections they have a habit of choppy traders around and creating some issues.
By Wednesday the market staged a decent push higher which I was pretty confident it was a trap for the bulls and we had a date with lower prices again as the decline felt too shallow for what I was expecting, a decent mini wash out to create some bearish sentiment was needed.
What followed was another 2 days of chop and whipsaw as the market was really taking traders to the wood shed with the swings.
It still appears to be chopping around in 3 wave swings which are nasty to trade as they create traps for both bulls and bears. By Fridays close I was glad to see the markets actually close, so I could digest the price action.
If you noticed on Friday the DOW was pushing higher but the NDX could not get off the floor due to AAPL bleeding, but I was impressed that the SPX and DOW held their ground, but as of Friday close I actually feel there is still a move lower left for the markets before moving higher.
Whilst I remain bullish the US markets, I always want to try and gain the optimum price entries so I can maximize gains and whilst I don’t think the market is on the verge of some sort of crash (never say never).
I was really looking for a better entry for me and members to get long and I had the 1380-1390SPX area penciled in before this move started from 1423SPX, and I still feel that is potentially the better target to get long from, although if the market gaps up on Monday and runs away then we will be forced to chase higher, but that’s never a good thing as buying a breakouts always runs the risk of a failed move.
So early next week I still like the idea of a move lower to get long but with the FOMC, we might have to wait for the market to digest any announcement first; who knows maybe the spike lower will come from the FED announcement and a knee jerk reaction?
A fractured market is never a good thing and it was AAPL that was hindering the NDX, although GOOG never help much either.
The lack of continuity between the markets raises a big caution for me and I suspect Fridays move on the DOW not being registered by the NDX or SPX it is a potential trap, hence I still like the idea of some more weakness early next week although how it sets up before the FOMC will be a guess for now.