Wed 5/18/11. Next top date? Solution to our crisis?

(Update Fri 5/20/11 3:50PM EST)
My daily indicators are getting slightly oversold, but they are not giving strong indications of a bottom yet. OPEX has kept things in the 1330s and the possibility remains for a wave 3 up, but the day is closing bearish which opens the door to Monday weakness and a 50dSMA test. So, I've taken some of my long off the table at 1335 heading into the weekend. The System is still neutral with hourly resistance at 1342. Have a good weekend!

(Update Fri 5/20/11 9:15AM EST)
I will be exiting my small short position shortly after the open and looking to go long around 1340-1341. The too brief drop to 1338 wasn't quite enough to get Dynamic RSI to indicate the end of the rally from 1319. The pattern is looking triangular. So, the odds favor a current wave 4 with a coming wave 5 test of 1351. That is a key level I discussed earlier. If SPX breaks back below 1336, I'll briefly exit my new long, but Dynamic RSI will surely confirm the rally is over so I'll wait for another good long entry to 1370+. Good luck.

P.S. I exited my short at 1340.2 for a 2pt gain and entered fully long at 1339.3 with stop at 1336 unless I see Dynamic RSI confirm a retreat first. My profit target is 1350ish in a wave 5. After that, we'd likely get a wave 2 retrace of 1319-->1350ish back to 1330-1340. I might trade that drop with a small short position keeping in mind that once 1351 is breached, the odds for a 1370+ rally are very high, so stops cannot be too loose.

P.P.S. The System exited its remaining long at 1336 for a total 14pt gain. The System will look for a 2hr resistance break to reenter long unless SPX trades below the 50dSMA at 1325. I exited my personal long at 1336 for a 3pt loss. Looks like the OPEX analysis won out - Mr. Market wants the 1330s with 1335-1340 likeliest at the close. Amazingly, if I project the initial rally from 1319 to last until late Monday, Dynamic RSI is actually still at final support with SPX at 1334, so SPX still has a shot to be completing a wave 4 with a wave 5 to 1350ish. I keep thinking RSI will get low enough to confirm the rally conclusion from 1319, but it hasn't quite broken the final RSI low, and I don't think a rally lasting into Mon/Tues is out of the question. So, SPX may need to test 1330 to be sure. I'm trying a long entry again at 1333 based on my larger analysis with stop below 1329. Good luck.

P.P.P.S. Finally, I can say Dynamic RSI confirms that the rally from 1319 is over...unusually late and less helpful in this case. SPX possibly has 5 waves down from 1343.87 but might need one more mini 5 below 1330.67. If it is 5 waves down, then we have a potentially complete WXY/ABC from 1346.82 and nearly a 60% retrace ideal for a wave 2. If a wave 3 up is about to start, it will likely exceed the length of wave 1 (28pts), so SPX should exceed 1330ish+28=1358 with the 1359-1371 pivots likely the target and temporary resistance at 1340-1345. As I stated before, anything more than a 15-minute spike below 1329 opens the door for bears to take charge with the 50dSMA at 1325. OPEX could still peg the close at 1335-1340. I've got a busy afternoon so I'll be back on Sunday/Monday. Good luck.

(Update Thu 5/19/11 3:05PM EST)
Sold my short at 1339 for a 4.5pt gain on smaller position. But the choppy intraday top at 1344.80 arguably completed an ABC rather than a 5-wave impulse, so, combined with OPEX etc, I'm leaning toward another wave structure down to 1336 or slightly lower although another test of 1344/1345 is possible first. Thus, I entered short again with small position at 1342 with profit target of 1336ish and stop at 1346.83 (which would wipe out my 1st intraday trade gain). I'll lower my stop to break-even or better if 1338 is reached. My goal is still to go fully long within the next 24 hours or so whether I get confirmation above 1347 or below 1336, and I'm just trying to give myself a few points of drawdown buffer for that trade. Good luck.

(Update Thu 5/19/11 10:25AM EST)
Dynamic RSI has almost, but not quite, confirmed that a 5-wave rally from 1319 is likely over. A 2nd intraday drop below 1339 would probably do it, but there may still be a mini wave 5 up remaining. A 50% retrace currently (assuming 1346.82 is the rally high) would be 1332.66, so 1329-1336 would be a typical wave 2 pullback. My daily indicators, the 20dSMA and OPEX max pain suggest SPX will gravitate to 1335-1340 into Friday. So, I'm hoping for another long entry at 1330-1335 but may have to settle for reentry at 1335-1340 especially if another high is attained first. Falling below 1329 for more than a 15-minute spike would present an opportunity for bears to retake control. I doubt there will be much new to post until the weekend or Monday, but I'll let you know about any new trades. I look forward to your feedback about the original post below. Good luck.

(Update Thu 5/19/11 9:35AM EST)
I sold all of my personal long position at SPX 1345 from 1320. There may be a couple 4-5s left but I'm expecting a better entry point at 1335-1340 this week. The SPX 20dSMA resides at 1346 with the 10dSMA at 1342. The System took 1/3 profit on its long from 1325 at 1345 based on daily indicator topping signals and the 20dSMA, and the System will temporarily exit the remaining position if SPX drops below 1335.72. That will change with each new hourly closing high. There are multiple 10AM news items, so we could see a final ramp or an A wave down. A new cycle has likely started and new highs are almost certain once SPX 1351 is reached. Good luck.

(Update Wed 5/18/11 4:30PM EST)
I sold 1/3 of the long position. I will sell the rest temporarily on any gap up Wednesday or any drop below 1336.78. However, I plan to re-enter fully long within hours or days on the next 2-hr candle resistance breakout. I still think the mid-1340s are a likely target imminently followed by 1370+ within the next 1-2 weeks. The reasons for the temporary selling are 3 topping indicators (the 10dSMA, VIX support at the 20dSMA and a high NYAD reading) plus a nice gain to secure with all the choppiness and OPEX Friday likely pegging SPX at 1330-1340. None of those things indicate anything more than a likely 1 day top now or Thursday but I'll watch to see if it turns into anything more than that. Dynamic RSI on the 5min charts supports a 5-wave move from 1319, so I expect further upside after the next pullback which may only retrace 20-40% of the bottom but is highly likely to hold 1329. Good luck.
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First, let me discuss the current state of SPX. Then, I'll discuss the next projected SPX top date assuming the rally continues. And, finally, I'll discuss THE solution to our current crisis.
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My System entered long at SPX 1325 while I riskily gamed my System and entered a personal long earlier at 1320. SPX is bumping into its downtrend line from 1359 at 1336 currently as I write around 12:30PM EST. Above that, there is the 1343 pivot and the downtrend line from 1371 at 1350ish and falling currently. Below, the steepest uptrend line from 1323 is at 1335 currently with the next uptrend line from 1319 currently at 1330 and rising. So, if SPX breaks through 1336, it will likely attack the mid-1340s. If SPX breaks below 1335, it will likely fall down near 1330. In either case, unless SPX drops back below 1329, I think SPX will settle at 1340ish or perhaps a little lower into Friday OPEX. System hourly support is at 1325.92, so that is the rising line in the sand so to speak. SPX 1351 is a critical level for bears to defend. SPX 1350.69 marks a Fib 61.8% retrace of the top and 1350.42 marks a 3-daily candle reversal both of which would combine with SPX being above its key moving averages to place the System in official bullish configuration virtually assuring a new high. There is also a recent pivot at 1351.05. So, the System is trading an SPX rally based on likely cycle straddle bottom at 1329/1319, but the cycle bottom window is not closed until 5/23 and long positions should be more cautious until SPX 1351 is reached.
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Now, let's talk about a potential SPX top date. I decided to revisit Martin Armstrong for the first time in a while. Can anybody else determine whether he is predicting a stock market top or bottom on his significant June 13th turning point? Combining the document link below with others where he warns of the upcoming Asia dominance and debt collapse makes me think he is predicting a top, but his cycle is 8.6 years and it bottomed in late 2002 plus he speaks of coming inflation like every collapsing empire in history. He is more precise when speaking about gold when he paints June 13th as a turning point in either direction. He expects gold to either (a) bounce into late May, drop hard into June 13th and then rally for years or (b) rally into June 13th in the final parabolic move and then collapse into a more bearish scenario for a year or two. Apparently, he also believes silver has been in the window for an 11-year top for the last month making June 13th a likely secondary top or slight new high OR making it the end of a brief but damaging 2-month silver drop with 11 more good years ahead. All that makes me think he is treating June 13th as a potential pivot low or pivot high for the stock market too. I guess we'll need to see what happens in stocks and gold into the June 13th time frame. Maybe I shouldn't even care, but his technical and historical work are intriguing to me and have amazingly predicted many important turning points.

http://www.martinarmstrong.org/files/The%20Next%20Wave%2004-21-2011.pdf

Interestingly, Terry Laundry at http://www.ttheory.com has a small T projected end date of June 13th matching Marting Armstrong's 8.6yr cycle date exactly, and Terry and and his employee Parker as well as famous Peter Eliades have Ts ranging from months to 50+ years that coalesce from April 27th to June 2011. So far, SPX topped less than 3 days after the April 27th top projection but May/June could prove to be a series of tops/consolidation. Terry also has a large gold T topping in June 2011 and a HUGE one from 1980 topping in 2020 which happens to be the next huge 8.6-yr Martin Armstrong turning point after June 13th, 2011.

Of course, my own unique discretionary spending analyses using the monthly history at http://www.consumerindexes.com/ points to a delay of 4-6 months between significant spending pivots and significant SPX pivots (usually 8%-10%+ trend turns) along with 4-7 week delays for minor spending pivots. It makes perfect sense that significant discretionary spending trend changes would lead to delayed economic impacts. The 1370 top came 4 weeks after the last minor spending pivot low. The last major monthly spending top on Dec 1st projected an SPX top in April/May but the recent QE-induced delays have been longer so I've been predicting May/June. The top on May 2nd could be it, but late May or June is also possible. In any case, based on previous percentage drops and timings, I'd expect SPX 1249 to be challenged within 4-8 weeks from the final top.

My System has been projecting a cycle bottom around May 9th. So far, we have a straddle momentum bottom at 1329/1319 a few days on either side of that date. Assuming the straddle bottom holds, the next projected cycle end dates are 6/28 and 7/5 surrounding the July 4th holiday with a potential mid-cycle low around June 8th-9th. If the next cycle low were to occur in the first week of July, the next cycle low should occur in late August. I bring that up because my discretionary spending analyses project a likely significant SPX low in Aug/Sep (bullseye around Labor Day) assuming the February spending low sticks.
Oil above $80 led to recessions in its previous 2 cases within 6 months or so. It will likely do so in the current instance as well. If so, a recession will later be recognized to have started in the middle of 2011, and a large stock market drubbing is likely to precede that. That does not offer a refined date for a stock market top but certainly strongly supports a mid-2011 top.

If SPX intends to make a higher high in an expanding EDT or however you want to count it, I suspect the rally will last 10-18 trading days which is the range of time for the last 2 rallies (including the bottom and top candle). Accounting for the Memorial holiday and assuming SPX 1319 on 5/17 is the bottom, that gives a target top date of May 31st to June 9th. There is only 1 trading day separating June 9th and the June 13th cycle date described above.

Putting it all together and assuming SPX bottomed at 1319, SPX should top between Memorial Day and mid-June possibly grinding choppily into June 8-13th. Then, SPX should test the 1220-1250 area which would mark an 8-10%+ drop to the bull market uptrend line and pivot support. With lows tentatively projected around the July 4th holiday and the Labor Day holiday, I suspect SPX will test 1220-1250 in both of those time periods forming a right shoulder with the neck line to broken later in 2011 or early 2012. But, only the market knows for sure. When you combine all the technical evidence with fundamental evidence like QE2 ending, European problems, debt/credit problems, government spending reductions, baby boomer aging/demands, unemployment, the housing debacle, energy costs, education costs, health costs, souring consumer sentiment, MENA turmoil, Japan's ongoing disaster effects, peak margins, heavy insider selling, seasonal investing behavior, falling volume/volatility and 4-year presidential/business cycles, the evidence strongly suggests there are riches to be made in June/July/August on the short side if one trades with patience, good money management and conviction trading around short positions.
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Now, let me discuss THE solution to the American crisis. Before I start, let me say I don't really believe there is one catch-all solution and I'm not the first one to propose it. But, it's a catchy line and my solution does cover the vast majority of problems. The solution is (drum roll please)....a strict balanced budget amendment to the US constitution. Yes, even the constitution gets violated and the language would need to carefully consider all loopholes and the current situation. I suppose there could even be an argument for allowing a certain small annual variance as long as deficits and surpluses are balanced over reasonable economic cycles. But, regardless of the detailed wording, a constitutional amendment would...
 
1. show the nation and world that we are serious about fiscal responsibility
2. recognize the undeniable fact that no person or nation can financially survive with an unbalanced budget forever...please see the ancient history of every empire or the recent history of all the credit card defaults, bankruptcies and foreclosures
3. financially educate every young person in school as the constitution and history are studied...this long-term effect cannot be underestimated
4. bring more balance to budget fights across the legislative, executive and congressional branches.
5. make it more likely for US states to fall in line and, even if they don't, they wouldn't have profligate federal spending to support the huge imbalances we have today
6. likely retain our country's AAA credit rating even if we needed 5-10 years to attain budget balance
7. prevent politicians from making as many unrealistic promises, and, any promises they did make would be subject to discussion of how they could be accomplished while keeping the budget balanced, and even if the budget estimates are wrong, we'd typically find out within 1-2 years and be forced to balance the budget accordingly and hold the appropriate politicians accountable.
8. prevent corporations from having as much influence as they have, because every dollar of tax revenue and spending becomes more precious to the government with each favor/promise not able to be painted over with deficit spending since there would be limits in place
9. make the government more efficient since they'd have to watch every dollar better and show fiscal restraint and quicker annual adjustments like normal corporations and people
10. bring real budget discussion to every political issue and debate
11. provide a natural buffer and balance to business cycles and inflation
 
After a lot of thought and reading over the years, I think there are really good things that the government could do including tax reform, energy independence, minimizing the Fed's influence, campaign reform, severely punishing and jailing fraudulent and illegal corporate activities, true reform of the health, legal and education systems, elimination of most federal agencies and ejecting all illegal aliens among other things. However, no matter what idea I come up with, I can think of a million ways that the government will screw it up by using the savings/benefits for other horrible ideas, favors and bribes. We cannot eliminate human nature to make promises, lie, exaggerate, make shady deals, favor those who you know or rub your back or say whatever it takes to keep a job, power, fame or money. So, although I'm sure there would be attempts to circumvent a balanced budget, at least that would make each political idea/favor/action more accountable on a timelier basis and a deeper part of the national discussion and thus reduce the stupid/evil actions or at least keep them within financial limits rather than screwing children and grandchildren.
 
Personally, I think a balanced budget amendment combined with tax reform (such as the Fair Tax which would make us a world corporate haven), immigration reform (thereby opening up more jobs to Americans and reducing handout spending), financial reform (less leverage, more openness, investment/banking separation, real punishments that deter) and Federal Reserve reform (to define stable inflation as 0% and reduce/enforce power) would be the ultimate way to boost the USA back to greatness. But, if you think about it, a balanced budget amendment might drive more disruptive reforms like those I prposed because the government couldn't rely on deficit spending and empty promises to get what they want anymore. So, to me, a balanced budget amendment would be THE best solution for our nation's future. And, although it might be dang near impossible to get implemented, it is worth the fight and it appears Americans are becoming more willing to fight for such things.
 
Please let me know your thoughts, because I am considering putting some of my time and money behind such an effort and I don't want to go into to something that does not meet my goals of saving America's future for my children and grandchildren. I did not read a single article or blog about such an amendment before logically arriving at the conclusion I did. I hope that makes my conclusion more sound and less influenced, but I guess it could also make it naive. I'll do some homework. Thanks for reading and good luck.