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Emotions are running high lately as bulls fight to maintain gains in excess of 65% in the SP-500. Artillery for the Bovinus Optimus appears centered on throwing out arguments like what it means to hold above the 1100 level and a most seasonally jolly time of year for investing historically. Oh yeah, you can also throw in the sidelined money shtick of those folks being forced to chase and the spirit of noshing heavily on those reinvigorated green shoots, commodity-based efforts of late. "Booyah!"

"BOOyah?" In what could potentially be a "Turnaround Thursday," the first argument is being put to the test. In Thursday's early going, prices in the SP-500 are about 0.70% below 1100 and Tuesday and Wednesday's back-to-back tepid holds, which happened to mark way too many bulls on the airwaves of CNBC living "la vida loca."

Admittedly, this strategist is a bit frustrated by the manner in which the bull has managed to get so far in its travels over the last few weeks. However, that's the market isn't it? Of course, since everyone lays claim to having picked the bottom, market lore says we're not allowed to pick the top as well.

Case in point, we need go no further than looking at our technical-oriented pal PS Elliott since the July breakout. Shown below in Figure 1, Elliott has been calling, wrongly, more than a few tops in the SP-500 (SPY). The current action, sans Thursday, has the Wave count set at 5 for a fifth time in-the-making.

The good news for the bear camp, as this strategist attempts to maintain a Zen-like even keel directionally, is Thursday's break below the dearly held 1100 does afford a nice spot to crawl out from the clan's well-used cave. Looking below, we can see the two inside candles which held above 1100 (110 in SPY) but failed to go anywhere, have also been butting heads with the 50% cycle retracement from all-time-highs.


Figure 1: SP-500 (SPY) Daily

Additionally, Profit Source's out-of-the-box oscillator has been negatively divergent during the four and now "fifth-fifth" wave count. Finally and frustratingly so, last week's VIX Stretch signal failed to reverse the market's trend beyond a two day pause in the action despite prices in the SP-500 at that time failing just below 1100. That said, I can't help but think it would be simply "classic" of Mr. Market to now succumb to gravitational pull and pulling the carpet out beneath price action which heavily boosted enrollment into the bull camp.

At a minimum, the latest action does appear to represent a good entry spot for bears and perhaps a "stop and reverse" situation for bulls, once we get through this little bump in the road. A breakout above highs, were that too occur, would enjoy a technical air pocket above the 50% level and have the support of a weekly inverse H & S projected move at its back. However and more to the point, first things first and that's all about "red chutes" rather than the green shoots variety.


Figure 2: Mr. Market (GS) Daily

"Goldman Sached?" A second case of frustration of late, anyone that follows the market barometer known as Goldman Sachs (GS) could have been left asking "where's the beef?" in recent weeks. Of course, we know the answer to that question. The proverbial fast money has been in the commodities-based carry trade. In the process, the broader market price action has left the other Fast Money's sometimes convenient canary in the coalmine indicator-to its own devices and sacked below its 50-SMA. Something tells me, the misplaced indicator of late might be conveniently picked up once more in support of a great, "Well, of course you had schnitzel a little something."

Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.

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