An Update on the S&P 500

During the course of today, I looked at how we may count the advance off the 200-week SMA as an impulse wave (here), which included what I would like to see before gaining a lot of confidence in the bullish count. I then also reexamined the bearish case (here).

Both remain possible.

In favor of the bulls, more generally, we know that sentiment is horrible, clearly at levels that historically have coincided with major lows. We are also oversold and we successfully retested a major, long-term moving average. In favor of the bears, we don’t seem to have any Fed pivot in hand, and we all know that sentiment and oversold-ness can get poorer and more oversold (in other words, those things aren’t enough to justify a low by themselves).

Looking at this structure on futures (noted earlier as well):

ES

This is generally sort of a bearish structure. These are prone to serve as consolidations that continue in the direction whence they came. It is possible that this does that, too. It’s also a little odd that it’s a straight shot. Like, where’s the 2? Even coming out of the COVID low, there was a deep-ish “2.” If we zoom in and try to count the peaks naturally, this is what we would probably want to do this:

ES

That’s counting all of the waves naturally, but where is the Green 2? And so it is possible that it is a corrective advance (on futures—cash can have something different).

And if that’s the case, it could be this:

ES

And that might make sense (if this does fail) as—if we are in a triangle (again, on futures—cash may be different)—each leg of the triangle should be a 3-wave move. This unrelenting advance may have just been a short squeeze in its purest form. Barely a sip of air.

So, both remain possible (bullish and bearish outcomes). I am leaning to the bearish side. I did take my puts back, but I also added a few calls just above today’s highs as another hedge.

I pointed this out in the chat today; these structures on cash are similar:

SPX

These can be little distributions. So these can be those weird “ending diagonal triangles” that don’t do what a lot of people are expecting. I noted that on the day of the CPI print prior to gapdown, for instance (here). So let’s see what happens. I wish the VIX was really breaking down, Bitcoin in a better count (despote its breakout), etc. If I take everything together so far, I suppose I lean to the view that this is a countertrend rally that may fail.


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