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Holiday Update IV - 12/31/2015

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Wednesday's price action threw a monkey wrench into our most recent forecast published as Holiday Update III. I'll tell you why...

In chart #1 below, had the move off Monday's low truly been wave c of 3, the latter would have looked past the December 17th Fed decision high, forging ahead towards the projected harmonic target. Unfortunately, today's action was nothing of the kind.


Chart 1. ES H6 (S&P March futures) - The most recent forecast alleging the 'January Effect' is in force. Not so, said Tuesday's price action.

In light of the failed forecast, two likely scenarios immediately come to the fore:

Scenario 1


Chart 2.  This particular count suggests wave 4 will end in the mid 2040's, setting the stage for wave 5

Scenario 2


Chart 3. This alternate count foreshadows an outright reversal on the back of a sideways A-B-C pattern. The bullish Shark has its PRZ in the vicinity of
wave B's endpoint. The odds would favor a break of endpoint B, and hence a failure to hold the PRZ, should this SHARK play out.

DeMark Exhaustion Signals

With respect to the major indices, several DeMark exhaustion signals are either evident or forthcoming, and on multiple time frames, to compound the bearish severity. 


Chart 4. ES H6 (S&P 500 March futures). Bar #13 is forthcoming. 


Chart 5. The S&P 500 (cash) is all but a few days away from a 13-bar sequential sell countdown.


Chart 6. The Weekly chart of the Dow Jones Industrial Average $DJIA) sports two exhaustion counts: TD Combo Sell 13 and TD Sequential Sell 13. The daily
chart registered a TD Sequential Sell 13 on Tuesday.


Chart 7. The monthly chart of the Russell 2000 ($RUT) sports a TD Sequential Sell 13.


Chart 8. The weekly chart of the $QQQ recently registered a TD Sequential Sell 9-13-9


Chart 9. The quarterly chart of the $QQQ registered both a TD Combo Sell 13 and TD Sequential Sell 13 in recent quarters.

Volatility Futures ETF (VXX)


Chart 10. The daily chart of $VXX sports a TD Sequential Sell 9-13-9, as well as a double bottom and a Broadening Formation. This could be the sell-off that
carries this so-called fear index ETF to 26.40 or higher. 

Transports


Chart 11. Though the $DJT did manage to bounce off the neckline, the ultimate downside target has yet to be reached. A full or near full) wedge retracement
would be expected

Breadth


Chart 12. The number of new 52-week highs remains depressed.


Chart 13. The number of Advancing Issues vs. All Issues (All US Stocks) is nowhere near 80% or 90%, reflecting lackluster breadth. "90 percent" days are 
a recipe for sustainable rallies.


Chart 14. Tuesday's Advancing Volume vs. Total Volume left much to be desired. "90 percent" days are a recipe for sustainable rallies.


Chart 15. The TRIN (computed across all US stocks) , is larger than 1, suggesting an unhealthy rally.  

Pre-Open Clues


Chart 16. The pre-open pattern suggests a bounce back to the triangle area upon the start of the new session.

The 3PDh Pattern Status


Chart 17. Though not shown in its entirety, the current 3PDh pattern remains in its 'First Floor Wall' phase,  the compression areas I've labeled as
'Chess Game #3'. I've chosen to label several areas 'Chess Game #x' to emphasize the inherent difficulty to trade such trendless phases of the market.
'Chess Game #1' is the previous 3PDh pattern's 'First Floor Wall', and it consumed a couple months before breaking out towards the 'Chess Game #2' phase,
 
or what would be the 'cupola' of that 3PDh that ultimately 
led to the summer crash. We're looking for a repeat in 2016.

Trade smart,

 Peter 


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