Market Update for Tuesday, October 24th, 2023

Good afternoon, traders.

Well, we’re fussing at the 200-day SMA. Despite the bears getting two consecutive closes under the moving average, they have been unable to produce a strong break below. And despite the bears’ being unable to break us down, the bulls have their own faults, too. They have been unable to make any new highs and continued resistance keeps being maintained between 4250 & 4260.

This has produced for us an ascending triangle:


Normally it is considered a bullish pattern, but it’s also the very same structure we just fell from about a week ago. The patterns can fail. So, as with any rangebound condition, this is going to break in a direction. If we break up, we may travel back to the H&S neckline above us. If we begin to move powerfully up, and especially if it looks like we are going to gap up over that upper green rail, I will cover shorts and look to go long. If this breaks down (which is still what I am expecting), this structure will probably be a 4th wave triangle, and we can expect a 5th wave to fall from it.

It is regarding that 5th wave and what it can look like that I will devote the rest of tonight’s article to.

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So that’s the plan here. If the bulls start moving us up, then the 200-day is strong support and it should mean we’ll have a bigger bounce of some kind. But, the put-to-call ratio is absurdly low—at a level typically seen at market highs—which indicates a great deal of complacency. A complacent market doesn’t require a move lower but what it does mean is that if we do start moving lower, there’s very little protection out there and it can make the decline stronger. And you can see how that might fit in with the picture I have presented above.

Ok, we’ll see what happens. I see too much strength, I’m out. Otherwise, I’m still aiming for lower prices first. I hope everyone has a fine evening.

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