The past several weeks have been a slow grind higher for the S&P 500, and it seems that we have been stuck in a “hurry up and wait” market.  The extended move higher is likely drawing in more and more long positions for the SPX, which is a case of traders being afraid of missing a move higher.  When traders begin to pile in a certain trading position, typically the market will shake those traders out.  Therefore, current levels are very dangerous for long positions as price action remains at a critical inflection point.  We have two different wave counts for the SPX, and it seems both would suggest a move lower soon.  A move lower would be in the form of the start of a larger move lower that would last several months, or it would be a smaller retracement setting up a continued move higher for the next several months.

The wave counts for several markets are not very clean, which likely means that we remain in corrective patterns.  These scenarios are difficult for traders, and typically cause traders to lose trading capital due to a lack of a tradable trend.  It makes a lot of sense to remain patient to wait for the higher probability trades.  Trading is a game of “where are my probabilities the best or better”.  Remember of course that the tendency for the markets is go higher, and on average the market goes higher.  Also it is important to note that Chinese equities may have based out in the short-term at minimum for a move higher, which could support the S&P 500 and Crude Oil.  The USD index continues to be a mess, and our conviction is to not buy the DX.  We actually prefer selling the DX at current levels.  Now to the charts.

Our current primary wave count for the SPX remains to be this first daily chart below.  The abc correction higher has pushed above the critical 1306 level with a very important trend line resistance just above current levels.  Currently the trend line comes in at about 1322-1324.  The trend line extends lower all the way back from the 10.11.2007 high.  A break above would be critical for the bulls and really hurt the bears.  It is important to recognize that this move higher is becoming overextended and overbought, therefore it is due for a pullback at minimum.  However, if this wave count is correct, once price action puts in a top we should see sharp price action lower very verry soon.  If we don’t get the sharp price action lower very soon, then we must shift to our alternate wave count.

SPX Daily Candle chart

Here is a look at our alternate wave count for the SPX.  It is a more bullish interpretation that expects more upside in the near term.  The evidence across the markets is pushing us more and more to this interpretation, especially if we don’t get a sell-off very soon.

SPX Daily Candle chart

The TNX has failed to break below 18, which likely points to higher levels in the near term.  We expect that price action may create an abcde triangle for wave iv over the next couple months.

TNX Daily Candle chart

Copper continues to look very choppy and may have higher levels ahead to complete the corrective wave (b).

HG Daily Candle chart

Crude oil has continued its holding pattern, but we believe a wave 3 break out to the upside is very near.  This expectation is part of what has us leaning more and more towards a bullish SPX for the months ahead.  Price action should find good support at the 98.37 and 97.35 levels, where we believe it’s a buy.

CL Daily Candle chart

The AUDUSD continues to be one of our favored wave counts that we have continued to track.  We expect price action to complete wave (1) soon, and then retrace lower for wave (2).  This wave count is very bullish for the AUDUSD, which likely means that the SPX is headed higher.  We will be looking to enter a long position soon, if price action plays accordingly.

AUDUSD 4Hour Candle chart

Apple is pulling back for a buy opportunity soon, which is another bullish indicator for the markets.

AAPL 4Hour Candle chart

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