Last week, SPX declined over 100 points to a new closing low and is ready to challenge its intra-day low of 2604. DJIA matched it with a loss of 1127 points for the week. But NDX was the worst performer, dropping 340 points for a new correction low. SPX is approaching a support level just above the former low of 2604. Perhaps for this reason, or because of the Thanksgiving holiday, breadth was relatively bullish in the last couple of days. Does that mean that it will hold in this area before staging a good rally?

If selling continues into next week, it will amount to a change of structure with a new low for the A wave (SPX 2545?) before we get the B wave rally. Should this be the case, we are looking at a more protracted bear market in terms of both time and price than was originally estimated. We’ll take another look at the SPX weekly chart to show that a decline of 700+ points is actually the most logical estimate that we can contemplate.   

Chart Analysis  (The charts that are shown below are courtesy of QCharts)

SPX weekly chart

There is a debate (as always) about how long and deep this correction will be. The main purpose of displaying the chart below is to arrive at a potential target for the proposed evolving bear market. With the assist of Elliott Wave theorists, I have labeled the 2941 high of 9/16/18 as the top of wave 3 of the uptrend which started in March of 2009. That wave had its start at 1011 in June 2010 and traveled 1930 points before coming to an end. Since it is normal for a correction to retrace anywhere from .382 to .618 of the previous wave, the minimum retracement we could expect from this uptrend should be down to about 2204, as shown on the chart. This retracement would measure 737 points, and it would correspond to a good support level, as you can see on the chart. But there is even better support below at the 2015 high of 2135, and since .382 is, after all, normally a minimum degree of retracement, it is not inconceivable that the expected bear market would end up measuring a little over 800 points before it is complete.