Week of 1/7/02 --> SPX 102pt, 9%, 7-wk drop immediately
5/13/02 --> SPX 333pt, 29%, 10-wk drop immediately
9/2/02 --> SPX 228pt, 24%, 4-wk drop, 1/2-wk delay
7/21/03 --> SPX 40pt, 4%, 2-wk drop immediately
6/7/04 --> SPX 80pt, 7%, 7-wk drop, 1-wk 1/2% delay
10/24/05 --> SPX blastoff
8/18/08 --> SPX 460pt, 35%, 7-wk drop immediately
4/26/10 --> SPX 209pt, 17%, 10-wk drop immediately
1/17/11???
In the last 10 years, the Shanghai Composite has closed more than 2.5% below its 20, 50 and 200wSMA after trading above it for many weeks on 8 occasions. On only 1 occasion did SPX rally for more than a week or so, and that occurred 5 months after the Shanghai bear market bottom (3 years after SPX) on the 2nd bottom retest forming a second higher low with SPX coming out of its year 2004 consolidation. The other 7 occasions included 3 drops > 24% of 7-10 weeks and 3 drops of 4-9% of 2-7 weeks with one in between at 17% for 10 weeks. Yesterday, Shanghai closed 3% below all its key weekly MAs, and it is fairly flat tonight. IF IF IF Shanghai stays about where it is or lower by the end of this week, the odds above highly favor a large multi-week SPX pullback beginning this week or next with any upside being a gift to short.
Now, I should point out that the only failure (2005) and the 2 smallest SPX pullbacks at 4-7% (2003, 2004) all occurred during a cyclical SPX bull market. Since SPX has obviously been in a cyclical bull market since 2009, it's not unreasonable to think a smaller, shorter 4-7% pullback lasting 2-4 weeks is likely at this time. From 1293, a 4-7% drop targets about 1200-1250.
I've been studying cycles this weekend, and, although I'm not prepared to publish results yet, I've found a very reliable cycle low indicator that projects a low on Jan 24th +/- a week or so. It is very uncommon for the high to come in less than 3 days before the end of a projected cycle end unless the drop is ultimately weak, so SPX needs to have already topped or top by Tues/Wed to make a 1-2 week drop. If we see SPX rise to 1300-1313 into late this week or early next, a smaller drop will be likely and possibly even hold the recent1262 low.
If this cycle and the Shanghai indicator come together, I can see 2 scenarios over the next 1-3 weeks.
1. SPX rises to 1313ish and then falls back to 1262ish.
2. SPX falls from 1293-1300 to 1225-1250.
The latter scenario could result in the EDT scenario I presented with overlap at 1227, but there is literally only a few points leeway below 1227 as January closes out to maintain a contracting EDT, so I consider that unlikely. Max option pain for SPY this week is at 1245-1250, so there's an argument for a 1-week 3-4% slide which might be all we get unless Shanghai stays down. Apple could take a bite out of the momentum especially in tech, so any more upside should be minimal and shortable IMHO. Daily System support is around 1275 currently with 20dSMA support rising from 1266 with the recent 1262 pivots just below that, so 1260-1275 should provide temporary support on any pullback. I expect the next 2 or 3 cycles to lead to much sharper drops ending in March thru June. Good luck.
Stu,
ReplyDeletethe naive count still in play (nothing strange with that and again just as the most simple wave count I can come up with. I have tons of others...). I believe we are getting close to the end-game.
From a chart perspective:
Minor1=Minor5=129,79
Minor5=68% of (minor1 thru minor3) = 131
Major1=Major5=130
http://screencast.com/t/mgWAcKl5
From a date perspective it seems that 2-3rd week of January is the "deadline" (Fibonacci time extensions of minor1). Time is not really part of EWT but at least it gives an indication.
FUT, Thanks for sharing. As you know, I count 667-->1220 as an ABC using S2EW. Still, you could be right since EW is a very inexact science. But, using what I have studied and having learned that the more typical counts usually win despite any biases I might have, the S2EW count fits alternation and typical B/X-wave retracements better since even the largest dips since March 2009 have been < 40%. And, since the 1011 low, S2EW can now support the rally as 5 distinct waves making it A of Y from 667 OR making it abcxa of Y from 667. In either case, there should be one more multi-percent drop and retest/break of the highs over weeks (or possibly months). Those are my thoughts but I am relying extremely little on EW right now. Good luck.
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