INDECISION UNDER THE DARK CLOUD

This week the ES and other indices at the close indicated that they are probably not taking a direct path to the lower lows in order to complete the pullback. They closed rather indecisively, hinting that they would not mind taking a bear path and postponing the decision to the next week.
Let’s explore the hypothesis from various angles.

CANDLES:
(SPX Candles chart and Candles-Weekly-All)
Monthly
November SPX candle canceled any bearish mood in September and October. There are three weeks to go and anything could happen.

Weekly
NQ: The most concerning one is obviously NQ. The futures, despite the mighty effort in the closing hours, closed 40 points below the middle line of the previous week candle, producing a clean Dark Cloud Cover candle. The last time this candle appeared in NQ on the weekly time frame was in February 2020. There were only other few occurrences in the past and most of them led to sizeable pullbacks. Also note the fractals in candles (they also exist) – 5 weeks prior to February crash and 5 last weeks now. The Dark Cloud is considered the second by its might after the Bearish Engulfing.
I don’t know what happens next week, I am just pointing at the signs.
DJ, SPX (both cash and futures), and NDX completed Bearish Harami combos. While they all require confirmation next week, the odds are on the bears’ side.
SmallCap completed the Spinning Top, however, it would be more bearish if the green body was smaller. Again – indecision that requires confirmation.

Daily
Daily SPX resembles a Bullish Hammer. Potential reversal, but the odds would be much higher if the candle closed above 8 EMA. While I expect somewhat higher prices next week, the 3670 area would be a major battleground for the next week.

TA:
I can see many technical indicators starting to deteriorate. In the last few days, DJI, NDX and ES had their daily PSAR to flip on the dark side. We will see if SmallCap and SPX join them next week. I am getting cautiously bearish based on these signs.

MUSINGS:
Based on the aforementioned, I am expecting a lot of whipsaw moves during the next week. The first wave A as marked on Short Term chart seems complete and it looks like there was no clear wave C that would wrap up this pullback. If this is correct, I would expect a wave B longer than wave A and a potential attempt to complete the whole pullback by wave C. If there is no clear motive wave C printed again, the pain can continue further (“…take your time, make it slow…” – ABBA). I made an attempt to project a possible path for the next week, so treat it as an attempt.

On my Long Term chart, I made minor changes. The price is floating at the level that would make wave 5 equal wave 1 in the red count. We are there now. Would it go further up or reverse? I hope to get some answers next week. The next week will help to determine whether the top is indeed behind and the possible duration of a pullback. I am cautiously bearish, watching for confirmation of this week candles.

I had numerous doubts recently about the path and the 40000-feet view and could not get a clear answer. I decided to look at the RUT under microscope and examined its waves for the last 2 years. The result that I received is rather interesting I shared it here: https://investingangles.com/2020/12/10/long-term-forecast-russell-2000/

To wrap it up on a positive note, I want to share a joke I heard few years ago from a guy who worked at Environment Canada.
When you are in the woods you may meet a bear. In order to protect yourself, it is advised that you wear some small bells and carry a bear spray. You must carefully observe surroundings and watch for the signs of bears. Bear excrement is one of these signs, and it is also important to distinguish a grizzly bear scat from a black bear one. The grizzly’s usually smells like a pepper spray and contains the small bells.

Have a great weekend everyone!

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