I’d drum-rolled a 3348.75 bull market target loud enough and long enough that last week’s sharp reversal from a high that fell 11 points shy of it was more than a little disappointing. It was also odd. The ABCD pattern from which the target was extrapolated is so clear and compelling that we might have expected a tradeable top to occur within no more than a point or two of 3348.75. But 11 points below it? The miss amounted to just 0.3%, but that’s as good as a mile for those who were planning to get short when the target was reached. So how do we interpret the failure of buyers to reach this important price objective, one that has been nearly four months in coming? Very simply, as incipient weakness. Accordingly, we should watch for the downtrend to develop momentum in the week ahead and possibly longer. This is a novel perspective, since the bull market has routinely been exceeding our rally targets for years. Each time this occurred, we assumed — correctly, as it happened — that still higher prices lay ahead. So now what? A rally back up to the target early next week would negate the bearish implications just noted, but my gut feeling is that this is unlikely to occur. If the downtrend instead gets legs, this will be telegraphed by minor abc downtrends that start to exceed their midpoint supports and perhaps even their ‘d’ targets. Another way to say this is that down-legs may start acting impulsive rather than corrective. This hasn’t happened in a long time, but we should be alert to its meaning if it starts happening now. _______ UPDATE (Jan 27, 9:54 p.m. EST): The pattern shown in this chart is gnarly but serviceable, implying you could bottom-fish p=3226.50 gingerly with a small rABC pattern. A decisive overshoot would open a path to as low as 3184.00, or perhaps even 3153.75 if we move B-C down to a level. _______ UPDATE (Jan 28, 7:46 a.m.): The futures got nowhere near the 3226 midpoint support overnight, suggesting shorts could have a problem today. They may not get drubbed, but they are going to have difficulty every step of the way if they’re hoping to beat this gas-bag down to the pavement.
