Friday, October 7, 2016

MTU Weekend Ed - Indecision and Potential Triangles (10/7/16)

SPX has been in a messy consolidation inside a tight and narrowing range since late September. A breakout out of this range, potentially decisive, is inevitable at this point. Moreover, recent 3-wave gyrations (strongly) suggest a potential triangle may be at play. The challenge is that there are multiple potential triangles at play. So a picture is indeed worth a thousand words here. See Chart 1.

With these potential triangles at play, for the near term, it is therefore very important NOT to be overly bearish or overly bullish.

The blue and gray scenarios are appealing, subjectively speaking, for two reasons.  First, it counts the recent mess as a triangle at a smaller degree which not only represents a better form but also the complex leg of a triangle.  Second, the blue and gray scenarios are more time-consuming and are likely to complete at the resolution of the U.S. presidential election, which is timely.

Last but not least, Chart 2 tracks the upswing since the Feb low and shows how scenarios in Chart 1 can fit into the larger picture.