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Market Report: Bear Market Rally or Not?

Everyone wants to really know if this is a bear market rally or will it make new all time highs on the SPX. It's been a while since I wrote an article, but in my last article I was looking for a minor new high for the SPX. To end the bull market that started from 2009. We never did see that, although we did see a new bull market high on the NDX.

Into the February 2016 lows when most were bearish and calling for the end of the world, we were counting the decline as the end to either wave [1] of a larger bear market cycle or it could have been a [C] wave an alternative idea we are still tracking, which still supports a move to new all time highs, although based on the NDX I am still liking the idea this is probably a bear market rally currently labeled as wave [2] as shown.

Before

S&P500 Daily Before Chart
Larger Image

After

S&P500 Daily After Chart
Larger Image

So I am asking myself the question. Was that the end to the bull market? We got the expected bounce that we wanted, that was the easy bit, the hard bit is to work out if the market is still going to make new all time highs, or will it rollover and now continue lower under 1800?

When I look at the internals of the rally from the Feb 2016 lows I can count a very clean looking WXY structure and at Fridays high it counts virtually completed.

SPX

S&P500 60-Minute Chart
Larger Image

Whilst you can possibly count the SPX as part of some sort of impulse wave the look on the NDX is a problem for the bullish case, the structure is much sloppier on the NDX and really argues the case that the rally is a bear market rally against the Dec-Feb decline.

NDX

NASDAQ 60-Minute Chart
Larger Image

A strong break back under Thursdays low would help the bearish case. Going into next week I am looking for a strong reversal and a break under 1970SPX to support a bearish reversal, the NDX will need to see a solid close back under 4260 to find sellers. Whilst I can't rule out seeing new all time highs, I think this is a very similar setup to that of the rally we saw in March-May 2008. Back then the SPX tested its 200DMA around 1440 if I remember correctly and reversed hard. With the SPX testing its 200DMA things may turn nasty for the bulls next week.

If for any reason the market did see new all time highs, it will simply delay the inevitable bear market that is setting up as the weekly chart would complete the alt idea we are watching (shown in blue) as the end to a 5th wave from the March 2009 lows.

Until next time,
Have a profitable week ahead

 

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