Morning Update: Black wave 2 3950-3960

25 thg 1, 2023

We're retracing off of yesterday's close. Since all of my counts require a retrace it will interesting to see which ones are invalidated. I stated a couple weeks back that the bottom we strike here within the this pattern weather it's a wave 2 of c or b-wave, is a bottom to buy for a nice rally to 4300-4500. From time to time I do this so I thought it may be a time to check under the hood of the SPX.

I do not track stocks so I have no long-term EW counts in place....so the below charts are very rudimentary.

Looking at Microsoft, I could debate Microsoft the stock has a 5-wave move up off the low, and a 3-wave move down for a wave 2. This is what you want to see in a bottom. However, price last night hit the .764 retracement post earnings, and but until breach the wave 1 high of approximately $263 we simple have no conclusive clue that the bottom in November of $213 is the bottom. Additionally, breaching the 263 high is just a first clue. So, MSFT has a lot of work to do. I would say the jury is out on MSFT striking a bottom.

Looking at Amazon,

Unlike MSFT, Amazon has positive divergence into its last low, but the stock has not completed 5-up off the bottom. Unlike MSFT that has a full 1-2 in place. Maybe AMZN will pop after its earnings, but it still doesn’t explain why it’s so far behind in the pattern visive MSFT.

MSFT and AMZN are the largest components of the SPX, but these 2 stocks do not do the entirety of the SPX justice. Nonetheless, in looking at the largest 8% of the SPX components...if I was to sum up the SPX/ES charts...it’s only slightly negative. Yes, there are some constructive aspects of the above patterns...but nothing conclusive. Does it signal a constructive rally of some magnitude...You’ll get no argue from me on that conclusion.

If we retrace into the 3950-3960 area today, it's important to note that the next time price breach 4055...we're headed to 4300.

Best to all,

Chris