The Nasdaq Composite continues to give much cleaner signals

Not much to say. See my last post for commentary.

Summary: This is still a potential count. There are some topping signals in place. However, the SPX needs to break support and MAs to confirm a decent correction is in the works (i.e. at the very least a new low needs to be set by Wednesday). At the moment, I am in a 'prove it to me' stance with this count, I remain skeptical.

Cleaner

First: This is a hypothetical count. I am not entirely convinced we are seeing a top yet. However, my trend system issued a slew of short signals today on the 60 minute chart for the sector ETFs. However the SPY is still trading above lateral and MA support. So I am definitely leaning toward a top being in, but I am still waiting for some confirmation.

Second: The SPX is giving confusing action with the lower low today, making the count very ambiguous. But like I have been saying for pretty much the last year, the Nasdaq Composite (not the NDX [Nasdaq 100]) gives much cleaner waveforms, and waveforms that are more 'correct'. By that I mean if you are unsure about the SPX, but the COMPQ is giving you a cleaner count, 9 times out of 10 in the last year the cleaner COMPQ count is right.

And today's lower low on the SPX was not a lower low on the COMPQ. In fact, it looks like a perfectly nice B wave for a zigzag. This makes the second wave on the SPX an expanded flat. You can try to force it into a 4th and 5th wave, but I think that's wrong. Classic B wave expanded flat fakeout undershoot + a strong C wave reversal. That's what I think.

Third: You will notice I am counting this as an A-B-C down from the top. I still hold to the idea that this is a correction within an ongoing bull market, not the start of P3. I think the next wave we will be in is either an Intermediate or Primary Degree X, too early to tell. But whatever it is, I think it will ultimately be another corrective wave.

Gold

Like I have said many times before, I like talking about Gold when it pulls back, after everybody says that it topped. I don't like talking about it on breakouts.

My last set of charts (see Unloved and Gold) were showing Gold as it was bottoming into support.

The reason I wanted to show it right now is that there is another piece that is pointing to the technical objective of 1550-1600 that I have been showing for the end of this wave, and I wanted to discuss it before Gold officially 'broke out' again. There is the cup and handle that formed in the first half of 2010 which has that as an objective (again, when properly viewed on a log scale chart). And the impulse channel for the final wave also has that as a target.

Another thing to keep in mind is that Gold tends to have very violent and sharp 5th waves. Which is why I never bought the 'triple top' call on Gold as the end of the current Primary degree wave.


Still, this is all just noise in the bigger picture. I think this bull market in Gold is far from done.

So far...

As nice and impulsive down as the 5 minute chart looks so far ... it is still a 'blip' on the longer term charts (like the daily chart below).

It could be the start of something, and then it might not be. We are still trading well above major moving averages. There are a couple of support levels below and then the 50 day MA. If this will be a decent correction, we should take those out within the next few days.

However, even though the SPX (and by definition SPY) is still looking like everything 'could' be gumdrops and lollipops for the bulls, the internal mix of the market is not so good. My trend system (which looks at SPX [long term], SPY [short term / intraday], IWM, and the 'X' sector ETFs) issued it's first conflicting signal set (at least one long and one short signal) in months (it has been long or neutral for all the sector ETFs since September). That is another clue that goes into the 'topping process' pile.

Time to correct?

The count since July looks like it could be done (and I still maintain that it is corrective, not impulsive. See: Impulsive vs. Corrective).

The microcount looks impulsive down from the top (and no, I don't think it's the start of P3. See yesterday's post for my thoughts). However we need to start breaking uptrend lines (including the one shown below) for this rally to be considered to be over.

Again, this is a corrective wave, so there are still a myriad of ways this can still mutate and rally higher. Only when we start breaking trendlines, support lines, and some important MAs will this rally be over and a correction will begin. Not before.