My record at reading intraday charts is not stellar, but I see a likely 5 waves up from 1249 to 1267 followed by a correction down to 1257 with a small EDT in the Dow. If a larger EDT is forming, a 61.8% retrace to 1273ish would be fairly common. The upper triangle line will cross 1275ish at end of Thursday. 1271-1276 was the previous cycle bottom. C=A at 1275. Surpassing 1268 will eliminate the most bearish nested 1-2 scenario and could trigger some more short-covering. So, 1275ish seems to be a good target price. Much above that is bullish.
Today, TRIN was very high. VIX skyrocketed and may need a breather back down to its uBB20. My BB%10 is oversold and stoch had a small positive divergence (not RSI though). NYAD made a small change at an extreme low. All that tells me SPX could rally hard on Thursday, but there are usually TRIN echos when a spike occurs more than a few days in front of the projected cycle end date (March 23rd in this case). So, if SPX rallies Thu/Fri, I'd expect 1275ish to hold and new lows to be seen in the 1240s. I'm not as confident that SPX will pierce 1227 in the current downleg although an expanded EDT could get close. However, I do believe 1173-1227 will occur once we get a failed 20dSMA backtest at 1285-1310 in the coming week or two. There should be several 4%+ moves to catch in the next few weeks. Good luck.
(Update Wed 3/16/11 3:00PM EST)
Bears got a small whoosh, but bulls successfully bought the dip again. Incredible. But, I must say TRIN and VIX were sky high, so the drop got a little overdone. I took a little profit on my shorts at 1252 and then exited at 1262. The rally has overlapped 1260-1262, so I am thinking some sort of EDT may be underway. That means we could get more of the same for a few days...sharp rallies, sharp drops. Ultimately, I think this downtrend will end with a drop that doesn't bounce for a couple days, but that may have to wait a few days now. The most bearish view would be another nested 1-2, but the technical evidence is moving against that now. I'll re-evaluate the count tonight. Good luck.
(Update Wed 3/16/11 12:15PM EST)
SPX is now at 1264. Bulls have successfully bought the dip from August all the way to 11:05AM this morning. Bears need to press the issue right now. TRIN has finally spiked above 2 for the first time since 1332. VIX has jumped big. Bears probably won't get another chance for a while if they can't cause a cascade below 1260 today. If 1260 is broken, I have rough targets at 1252, 1241 and 1234. Since I believe the next few bounces will be wave 4s, they should be weaker and likely not exceed 1260, so the 1252 pitstop should be short-lived and we probably wouldn't get a decent bounce until the low 1240s were reached and possibly not until the 1230s. Good luck.
(Update Wed 3/16/11 11:30AM EST)
It is very possible that the heart of wave 3 of C/3 is about to unfold. 1260ish was the last reasonable support I had above 1227ish, so there could be a bit of a vacuum from 1260 down to the 1230s. However, VIX at 26-27 did pierce the Wolfe Wave trend line I charted a few months ago, and we have 3 waves down from yesterday's high at 1288 in a mini-panic, so it is possible we'll get a 3-3-5 flat back to 1285-1290 completing a gap fill instead of the 3 waves being part of more nested 1-2s. The current bounce to 1273-1274 is a 61.8% Fib retrace of 1281 and 1276 was a previous cycle bottom pivot, so, if SPX rises above 1276, the rally could easily extend another 1%+. If not, watch out below! OPEX is known for usually pegging a price level (sometimes referred to as max pain) or relentlessly moving away from that same price level...not usually in between. 1290-1310 seems to be that price level, so, using that logic, if SPX does break above 1276 now, it is very possible that it will consolidate near 1290 for the next couple days. And, if SPX cannot break 1276 today, the chances increase for a wave 3 down through 1260. My technical indicators are not oversold or signaling a bottom today which doesn't preclude a rally but certainly makes a wave 3 very possible if not probable based on my previous analyses. Bears need to get back below 1265, and then the panic could ensue. Good luck.
(Update Tues 3/15/11 3:50PM EST)
1286 was overlapped, and Dynamic RSI has now virtually eliminated today's bounce as a wave 4. I should probably take more time to evaluate things, but my initial thoughts are 2 possibilities.
1. SPX is forming a more complex correction which should lead to overlap of 1298 and possibly 1308+.
2. SPX is following Variation #1 from this morning with 1298 ending a running flat wave 2 (meaning A of 2 completed at 1308), but, instead of today's drop being wave 3 of C/3, it was merely another wave 1 down.
I favor #2 which is very bearish...for the time being. The dip buyers have not caved in yet, and they now believe the market is made out of teflon after Middle East riots and nuclear meltdowns couldn't bring it down, but technical damage has been done. VIX at its upper BB20, NYAD making a small change near extreme lows and MACD just below 0 could lend support to the market for 1-2 days, but we just experienced a 2% bounce which may be all we get, we are still a week from the projected cycle completion, the trend is down, there is not strong technical evidence for a bottom just yet and the Fed's statement about stronger growth and inflation certainly doesn't make QE3 more likely to occur. So, I am leaning towards the VERY bearish count for now. If 1326-->1261 completed nested 1-2s, FIBBEWIE targets 1180-1200 which matches my lower target range for late March or early April. The same goes for anyone counting down from 1332. And, that would still be an ABC from 1344 leading to a new high in a couple months. Folks, I know virtually all nested 1-2 bearish counts have bombed for the past 2 years, but it is still very much in play and would lead to a very dramatic drop over the next 2 weeks if bulls don't take charge. Good luck.
(Update Tues 3/15/11 2:35PM EST)
I reloaded short but the rally has been a little more powerful than I suspected. Technically, SPX could still be bouncing in wave 4 of C/3 until 1286 is overlapped. My natural reaction is to discard that count, because the retrace has now exceeded 50% and looks too large in price and time. However, Dynamic RSI still supports the wave 4 count since 10min RSI11-14 and 5min RSI23-27 have not surpassed the RSI levels seen at 1298. That could change before 1286 is reached, but the technicals still support one more wave 5 down for the time being. Assuming that occurs, I'll stick with my 1257-1260 target with an outside chance of 1250ish. If 1286 overlap occurs, I'll re-evaluate the count but I'd expect initial rejection from the underside of the previous congestion zone at 1290-1295. Daily NYAD is setting up to indicate a near-term low is imminent which supports either one more low or a more bullish count, but TRIN has not spiked, VIX is hanging high and the projected cycle end date is still a week away, so I have little evidence to get bullish quite yet. Good luck.
(Update Tues 3/15/11 9:45AM EST)
Holy smoke! Well, I'd say we can consider 1271-1276 pierced and the 1260ish projection fulfilled. Option #2 with its call for an immediate wave 3 of C/3 is now the active count. SPX just bounced to 1270, the underside of the previous cycle and pivot low, and a near perfect 23.6% Fib retrace of 1298. That is sufficient for a wave 4 bounce but there is a chance it retraces 38.2% to 1275-1276. However, even if our favored count for the last week or two is accurate, I can see 2 variations on it.
Variation #1: 1326-->1292=1ofC/3, 1292-->1308-->1286-->1298=2ofC/3 (running flat)
Variation #2: 1326-->1292=1ofC/3, 1292-->1308=2ofC/3, 1308-->1286=1of3ofC/3, 1286-->1298=2of3of C/3
Variation #1 only requires one wave 4 bounce, while Variation #2 requires two wave 4s. I think it is safer and more conservative to only expect one more wave 5 down, and, since SPX has already reached my 1260ish target, we should be looking for only one more slight low. 1326-->1292=34pts and 1308-->1286=22pts. Those are the potential wave 1s that the next wave 5 will correspond to. If we assume w5=w1*(0.5 to 0.618), then wave 5 should equal 11-19pts. If 1270 is the wave 4 top, then the conservative downside projection is 1251-1259 with 1257-1260 being most conservative. If SPX bounces above 1270 into the Fed meeting, the 1257-1260 target won't look so conservative anymore. I will reload short at 1271-1276, take my remaining profits at 1257-1260 and wait for a larger bounce to short or solid bottom indication to buy. Good luck.
(Update Mon 3/14/11 8:30PM EST)
Don't look now at http://www.consumerindexes.com/, but, last week, discretionary spending consolidated its February nosedive near the 2008 lows and has now potentially begun a new nosedive. Amazingly for those that only watch mainstream media news, discretionary spending has been hovering near the horrible 2008 lows for the last 6 months and is now actually attempting to break those lows. Unless spending recovers more than a little by end of month, the closing monthly November high will be confirmed as a pivot high portending a significant top (likely followed by a 1-2 month 10-20%+ drop) between late March and mid-May. Interestingly, the last 6 monthly spending pivot highs led to tops 4-5 months later that exceeded the SPX price at the time the pivot high occurred and ended at a 4-5+ month high. So, that would suggest SPX will exceed 1344 in April/May. To do so, I think SPX needs to wrap up its downtrend within the next 2-3 weeks...maybe 4-5 weeks if QE2 is stretching things and if the top extends to June which is a Martin Armstrong critical turning point. The spending pivot low at the close of August projected a significant price low (never less than a 9% drop in 5 cases since 2007) in Feb/Mar followed by a huge multi-month rally. We are currently in week 28 since September 1st which now makes this the longest amount of time to significant SPX low from a significant spending low (say thank you to QE2...the previous record was 27wks). To match a 9% drop from 1344, SPX would need to fall down to 1223.
Putting the spending analysis together, SPX should enter the 1173-1227 congestion area within the next few weeks followed by a monster rally to 1344+. A perfect example of a similar setup as compared to today was the June to October 2007 time period in which SPX dropped hard for 4-5 weeks followed by a slight new high 8-9 weeks later marking the bull market top. Of course, I'm not going to bet the farm on that scenario and maybe the next spending-induced top will fall shy of 1344 unlike previous cases, but it is a nice framework to keep in mind as my System and cycle work unfolds. And, S2EW does support another high to end a double zigzag since it counts 667-->1220=W, 1220-->1011=X and 1011-->1344=Y or AofY.
Also, it looks to me like the Shanghai Composite index (which I do not trade but believe is a good global indicator) is triangulating sideways since 2008. I have a guess at the proper count, but all 3 different triangle variations I can come up with should lead to one more large drop and 1-2 more large rallies which would match nicely with SPX 1173-1227 followed by an SPX challenge of 1344. Of course, you may recall my Shanghai Midnight indicator which projects an SPX crash once it closes more than 2.7% below all of its major weekly moving averages (20/50/200). My guess is that will probably not come until SPX enters a large wave 3 down much later in 2011. Finally, my amateur count on WTIC oil (which I do not trade but believe is a good economic indicator) is looking for 1-2 more highs at $110-111 and possibly $120-122 or higher. That should be enough to recognize the next US economic recession. In fact, based on the 2 previous cases in history including 2007-2008, $90-100 oil for any length of time IS already enough to cause a recession. Good luck.
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System Status
Position: Short from SPX 1331 on 2/22/11
Daily Trend: DOWN with trend resistance at 1326 and the 20dSMA at 1319.
Daily Indicators: Fairly neutral. Stoch has retested 30 (and now 20) as projected. MACD fell below 0 intraday but closed just above as projected. VIX still has room to run to its upper BB20 but has struggled at 22-23. Breadth is only mildly oversold. TRIN and TICK are neutral. RSI made a very small positive divergence today.
Weekly Trend: UP with trend support at 1271 and the 20wSMA at 1263-1268.
Monthly Trend: UP with trend support at 1173-1187 and the 10mSMA at 1186 and the 50mSMA at 1195.
Next Projected Cycle Low: March 23rd +/- 2 weeks.
My daily indicators are fairly neutral looking forward a couple days, but the daily trend is down. Based on cycles and technicals explained in previous posts, I expect SPX to pierce 1271-1276 in March likely trading down near 1260 and possibly trading below 1200 into April. Within that bearish stance, I see 2 possibilities over the next few days partially depicted on the chart below.
1. Red in chart. SPX would make a Fib retrace of 1332-->1286ish to 1304-1315 which coincides with the OEW 1303 and 1313 pivots. The count for this option is 1344-->1294=A/1, 1294-->1332-->1303-->1332=B/2, 1332-->1286=1 of C/3 wedge.
2. Blue in chart. SPX would make a Fib retrace of 1308-->1286 to 1297-1300 which has potentially already finished. The count for this option is 1344-->1294=A/1, 1294-->1326=B/2 triangle, 1326-->1286=1 of 3 of C/3.
Option #2 is the one I have been favoring for several days now and will be eliminated if 1308 is surpassed. Given (a) the nested 1-2s, (b) the broken historically-long consolidation area of 1294-1344, (c) the 2 consecutive unfilled gap downs, (d) the ideal negative news backdrop and (e) the Fib bounce projection of 1297-1300 which was already fulfilled this afternoon, the count for Option #2 needs SPX to drop quickly in a wave 3 without much further bounce. Any way I measure it, SPX should drop to 1270ish minimum in this scenario within a few days and then we'd evaluate the next setup.
Option #1 would allow 1308 to be broken on Tues/Wed and possibly even 1313-1315 to be tested. If SPX rallies much above 1301 on Tuesday, Option #1 becomes favored with the heart of wave 3 of C/3 down probably waiting until end of this week or even early next week fitting with consolidation into OPEX. I should also add that the Option #1 leading diagonal wedge could expand hitting a Fib 1282 target before rallying into the OEW 1303-1313 range. The only way Option #2 stays alive is a relentless drop below 1276 with only tiny bounces mixed in. Good luck.
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