Continue to give the bulls the benefit of the doubt
* August 17, 2015
Last week, the market presented us with another very straightforward setup, which it mangled into yet another complex structure. Since February, each and every straightforward bullish or bearish scenario has been invalidated, and replaced with a complex structure. This past week has been no different.
Previously, I was looking for a strong rally off the prior Friday low, which supported the bullish scenario, and broke the immediate bearish scenario. But even after providing us with the initial rally through 2085 on the S&P 500 (SPX), the market broke the immediately bullish scenario by breaking down below the 2064SPX level only two days later. This action has opened the door to more complexity, which is something we have had to get used to in 2015. The problem is that most seem to view this as only bearish, whereas it is not as simple as they believe. If one is unable to see the bullish side to this market as well, then you are looking at it with blinders on.
Ultimately, what the past week's action has done to my analysis is it has required us to lower our support to the 2040SPX level. Until that level is broken, we have no indication that we are dropping to the 1800 region in a larger-degree wave 4 just yet. Due to the market action this past week, we still have the potential to take us to new all-time highs in two ways.
First, the more immediate path would have this past week's bottoming recognized as a bigger b-wave, as represented by the green count. This would mean that the rally seen off that low was wave i in the c-wave to higher highs, which can still take us to the 2160-2175SPX region.
Second, the action this past week has opened the door to a 4th wave triangle, which could provide us with a rally to 2160-plus in the SPX. But such triangle would not likely complete for another month or so, as represented by the purple count on the 60-minute chart, so a rally to new all-time highs would be put off until the fall in this scenario.
So, for anyone who truly wants to be bearish at this time, you will need a break down below 2040SPX to open the door to the 1800 region. Otherwise, do not be surprised to see new all-time highs in the SPX in 2015. Just remember, we are still in a long-term bull market which still has several years to run, and will likely take us to at least the 2500 region in the SPX within the next few years. So, we may still want to consider giving the bull market the benefit of the doubt until proven otherwise with a break down below 2040SPX.
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