Fri 5/13/11. Triangulation?

(Update Mon 5/16/11 3:45PM EST)
By discipline, I was forced to stop out at 1329 for an 8pt loss on my personal long trade and the System was stopped out for nearly a 1% loss. The System will re-enter long above 1337 and will enter short mode if a breakdown is confirmed as described below. The 1339/1370 parallel channel bottom was perfectly touched at the 1327 low so there is no more room for support. I also see a potential ABC down from 1371 with a C-wave EDT finishing just below wave A. If so, we should see an explosion higher and I would jump on the ride based on hourly candles with plenty of upside to 1370+. If not, we should see the 50dSMA at 1323 tested and broken followed by 1295-1300+/-. 

Aside from the normal behavior of triangle/consolidation breakouts, my cycle work also points to the split possibility of a big up OR down move. I use daily RSI5 and RSI19 to determine the cycle momentum low, and right now they have split opinions at 1329 and 1327 which happens sometimes. The low at 1329 came 2 trading days before the May 9th projected end date, and now we are 5 trading days beyond that date. Both momentum bottoms are within the normal cycle window which is still open this week and could indicate that the cycle from SPX 1249 is still completing. It is actually fairly common to have 2 bottoms on either side of a projected cycle end date. The same thing happened at 1173/1174 in November 2010 and 1040 in August 2010 etc. Although we've seen some bottom signals in the past week or so, we've not seen extreme indications like we got at 1249, 1173, 1040 etc. That would not be surprising for a wave 4/B which is what we're probably in if SPX has one more high left in it, but there is a chance we'll see more extreme bottom signals within the next 4-5 days. For now, SPX is not yet below its 50dSMA and has formed positive divergences on multiple timeframes within range of the projected cycle end date, so bulls still have a strong opportunity if they can hold SPX up for another day or two.
 
Occasionally, when a cycle price low is significant and early followed by a much higher low near the projected cycle end date such as what we had at 1295 and 1329/1327, you end up with multiple overlapping cycles in the next go-round of cycles. If that is taking place here, SPX would have 2 cycle end dates of 6/9 and 6/28-7/5 +/-.

So, in summary, my System and cycle work confirms the triangular/consolidation breakout possibilities. SPX has a bullish opportunity to finish its cycle low this week leading to a new high in late May or June and a bearish opportunity to trade lower into 6/9 followed by another low 6/28-7/5. The EDT scenario from 1249-->1370-1404 is virtually eliminated, so I'd expect a standard impulse if the direction is higher. The factor separating the 2 scenarios is likely 1323ish where the 50dSMA and 62% retrace of 1295 reside. Bears need to make that resistance. Good luck.

(Update Fri 5/13/11 3:55PM EST)
Daily indicators suggest a s/t bottom is imminent. There is what I call a scissor NYAD formation which is probably the most potent reversal setup although the reversal sometimes does not occur until the next day. Even if SPX were to gap below 1329 on Monday, I suspect that means it will not continue much lower immediately. I may post a strategy based on Sunday night futures. Have a great weekend.
 ______________________________
It looks like all my posts since Wednesday are lost due to the blog server problems. To recap the past week, the System went long at 1337 and closed that position at 1351.50, although I personally sold earlier at 1355. Since then, the System went long at 1343 with hourly support remaining at 1332, although I personally bought earlier at 1337 on bottom indications. Even though I posted that I expected 1-2 days of consolidation after the reversal off 1332, I did not expect such a big drop today especially with no daily topping signals. Regardless, nothing has negated my larger analysis...yet. All the action looks and feels like a triangular wave 4/B. If it breaks down below 1329, SPX is likely in a C wave down testing 1295-1300+/- and the System will go into short mode. If it breaks above 1351, SPX is likely in a final wave C/5 up to new highs. There are numerous possible counts. The 1339/1370 parallel channel was virtually touched at the 1333 low today, so it was certainly recognized and a channel/wedge is alive for the time being. I don't know which way SPX is going to break. I anticipate an upside breakout despite being closer to a breakdown now, but I'll trade whatever I'm handed. On the bullish side, the System is still long, the vast majority of margin calls should have cleared the system by now and the USD likely needs a wave 2 breather after spiking into its 50dSMA, upper BB20 and RSI negd. THE top is still projected to be May/June with May likeliest if we get an upside breakout. Good luck.