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Market Report: Back into The Bear Suits

SPX

In last week's report we were focused on looking for more upside for the US markets, I was confident that the prior decline was a corrective decline and new all time highs would be seen on the SPX. We could not have asked for more, out plan worked our well, much better than I had thought.

SPX Chart
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With the majority of bears looking for a 12 12 setup and a 3rd wave crash, we again faded the bearish crowd and were focused on looking higher, virtually a mirror image of what we did at the February 2015 lows. With the SPX making a new all time highs it's fulfilled the minimum requirements of the pattern, although the DOW has to make a new all time high, so I favor that we see a new all time high to align with the SPX idea.


DOW

The DOW could do with making a new all time high to potentially complete a possible ending diagonal which in turn could end a larger 5 wave move from the October 2011 lows. Once the DOW puts in the new all time highs its then I will start to look for evidence of a major turn. Ideally most that were bearish at the recent lows will have been stopped out and turned bullish.

Dow Chart 1
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I suspect the larger 5 wave move from October the 2011 lows could be ending wave 3 (alt wave C) from the March 2009 lows, so a substantial decline could be close by for wave 4 on both the DOW and SPX as shown.

Dow Chart 2
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Dow Chart 3
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Even a pullback to 1800SPX & DOW 16000 would not really do any real damage to the upside trend but I think it would do enough to reset the trend and correct the move from the October 2011 lows.


VIX

The VIX has pushed lower as we suspected it would, it's moving nicely towards our target area, but with the DOW expected to make a new all time high, I favor the idea that the SPX pushes higher, so the VIX can push lower under 12.00.

VIX Chart 1
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There is also the cycle chart I have posted before and that could potentially argue for a major peak in May as well.

SPX Chart 2
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So with the potential wedge (ending diagonal), the VIX bullish falling wedge and the cycle timing chart I can make a very valid case that we can see a substantial reversal from the current area, although I want to see a bit more upside, we may get that early next week. We are going to need some sort of reversal clue before we can start to get bearish, having stayed bullish for the majority of this year; it's only now that I have started to jump back into the bear suit again. I think May could be setting up for some fireworks and offer aggressive traders, opportunities in both directions.

 

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