SPX made a final probe to its upper trendline at 1751.78 this morning. From there it drifted down very slightly on low volume. Not a very impressive day for either side of the aisle, especially when considering today was one of the larger POMO days in October.

The Dow did not make a new high today, bolstering my thesis that This is the Index to watch. A crash fractal is already in place and all it takes is a decline beneath the 50-day moving average at 15156.90 to get the ball rolling. The other indices should follow.

I have been puzzling over the Wave structure on the VIX. The current pattern makes the most sense, since it lines up with the inverted Head & Shoulders formation and the Cup with Handle formations quite nicely.

TNX bounced from the hourly Cycle Bottom (not shown) on Friday. The current Minor Wave C is 47.6% the size of Wave A. The most common wave relationship is C = A, but the probability that C will extend is less than 50%, so we do not have assurance that Wave C of (4) will make a further decline. When RSI and Stochastics do not make a new low as price makes a new low may be considered a non-confirmation that suggests a reversal may be imminent.

I currently have the patterns labaled as if I were expecting a higher rally for Minor Wave c of Intermediate Wave (2). That may not be the case. The tree-wave rise from 1251.00 may simply be a correction of a new declining Wave (3). We’ll find out which it is in the next couple of days.

Regards,

Tony

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