Thu Sep 2. System neutral. Secondary projection nearly exact.

This is going to be a short note. I have been overloaded with work this week and the inactive System status allowed me to take a break from the blog for a couple days. Since SPX broke its 20dSMA today, that makes Friday a hi/lo marker day. System will issue a signal on any large gap which is very possible with the job report. However, upside is near short-term exhaustion and downside is likely limited to 1055-1065 max for a few days, so I would take at least 1/2 profit on any 1% gain and keep a more conservative stop until a trend becomes more apparent.

My Secondary projection box from Monday (was my Primary over the weekend) was about 1082-1094 where we spent most the day today. A few months ago, 1220 was a choppy area of resistance. Then came a double-top at 1130ish over a few weeks. Most recently, SPX double-topped at 1100ish over a few days. I suspect 1100ish is where we're heading, but probably after a pullback. My Secondary projection does allow for the current price area to be a top. Since 1039.70, S2EW RSI tells me SPX has (nearly) completed a 3-3-3.  Maybe that's a nearly complete 3-3-5 flat in which case SPX cannot fall below 1055 and is highly unlikely to retrace below 1065 before making a final high. Maybe the 3-3-3 will continue up further as a triple zigzag in which case SPX is unlikely to fall below 1060 in an X wave. Maybe the 3-3-3 is a completed double zigzag in which case we'll see SPX trade below 1065 with 1055 being final confirmation.

A few days ago, I looked back at charts over the last 20 years and SPX tends to continue the Tuesday after Labor Day what it started the day before Labor Day. Probably 80%+ of the time it was either flat or a continuation. Labor Day does not appear to be a particularly positive holiday for the markets. Having said that, the handful of days surrounding Labor Day were common multi-week turning points. My projections and the above analysis would support an SPX pullback to 1065-1075 over most of Friday and Tuesday followed by a final new high at 1090-1110 a few days later. Then, a drop near either 1040 or 1010 with dead cat bounce into the September 21st Fed meeting where they will postpone QE2 leading to a 10% washout in a matter of a couple weeks. If SPX gets much above 1100 without a rapid reversal, then the ABC counts above 1130 and the bullish counts will need to be considered seriously but I'm not buying the rally yet. USD has been hanging around its 20dSMA but its 200dSMA is rising and I suspect when SPX makes a new high near 1100, USD will bounce off its 200dSMA area reinforcing the SPX reversal down. Good luck.