Tues 8/23/2011. Probably more upside.

(Update Wed 8/24/2011 11:!5AM EST)
BTW, yesterday's high at 1162 stopped right at the 89hSMA and pulled back 6pts. Today's high stopped almost exactly at the 89hEMA and has thus far pulled back 14pts. I'd say those moving averages have proved their worth yet again. Stepping back and looking at the big picture, 1175ish was my estimate for a triangle wave c of 4 a  few days ago as charted, although I bumped that count down as my 3rd preference yesterday. Still, with SPX hitting an ideal triangle Fib target and moving average target after completing a possible ABC (or 123), I'd say the triangle could be in play if SPX drops much below 1160 and especially below 1152. I'm trying to keep an open mind and cannot ignore that evidence. SPX needs to make a higher high above 1175 before breaking 1152 in order to make the triangle less likely (although it's not completely eliminated until 1208+). If others are watching and shorting the triangle option now, they may bail out at 1175 which supports my previous story yet again about another surge if the 1170s are cleared. We'll see how this plays out.

(Update Wed 8/24/2011 10:45AM EST)
The SPX pullback from 1175 was right on schedule. Based on the size of the drop to 1165 (thus far...could go a little lower), SPX is likely forming wave 4 from 1121 now and the current pullback may be the largest pullback until 5 waves are completed. The alternate possibility is that an ABC completed at 1175 rather than a 123, but Dynamic RSI should help confirm or deny that or an overlap of 1152 would too. If 1121-->1152=w1=31pts and 1141-->1175=w3=34pts, then wave 5 could equal a .62 to 1.61 Fib multiple at 19-53pts with the odds favoring one or the other extreme. Let's say SPX falls to 1160. Then, the target would be 1179-1213. If one of those extremes is favored, that fits my belief that once the 1170s are cleared, there could be another short-covering surge like we got above 1155. In other words, if SPX rallies again today from 1160ish, it should ultimately stop near 1180 or above 1200. In fact, SPX will likely pull back from 1177-1184 either way whether that ends wave 5 or 1 of 5 from 1121, so the subsequent drop will be key to watch. Volume is relatively heavy compared to recent days probably due to short covering once SPX exceeded 1155 like I suspected. Remember, today was expected to be a more narrow range day since SPX rallied so hard yesterday and TICK was >1000 etc, so we could be stuck between 1155 and 1175 for the rest of the day. I'll post again if Dynamic RSI confirms 1175 finished an ABC rather than a 123. Good luck.

(Update Wed 8/24/2011 10AM EST)
The air is coming out of gold. I don't trade it but I'd still expect 1 more rally if USD breaks 73.45 to complete a wedge just below 72.70. Although Dynamic RSI is a little less reliable at the lower time frames, there is now evidence to support the current rally as a wave 3 using 5min and 15min Dynamic RSI. We only got a small pullback this morning, and RSI has made new highs. If it is a wave 3, we should only see a couple small pullbacks to complete a couple 4-5 combos. We just got the first 5min SPY volume surge when SPX hit 1175, so the first pullback is imminent. 1175-1177 were key Fibs I mentioned a couple days ago. FIBBEWIE favors an ultimate target of 1190-1210. That would likely only complete wave A but I'll evaluate the pattern again later today. Good luck.

(Update Wed 8/24/2011 9AM EST)
Just a note about my cycle analysis. The System cycle suggests a momentum cycle low on September 7th +/- 10 trading days (the price low can sometimes extend a few days). That is quite a wide date spread but the lows do tend to gravitate towards the bullseye, and any slight edge you can gain at projecting trading lows is good. Plus, the System does use other indicators to identify bottoms. Regarding the spending cycle, the 3 most comparable discretionary spending bottoms like we saw at the end of March fed through to an SPX bottom 28, 26 and 27 weeks later. That gives us a window of Sep 6-9 +/- 1 week or so. If we put the 2 cycles together, SPX should make a VERY SIGNIFICANT price low between August 23rd and September 23rd with September 7-8 being the bullseye. We are in that time window now with the bullseye only 9-10 trading days away.

If we assume SPX will not make another drawn out downtrend like it did at 1371-->1258, it will likely complete its downtrend in 5-13 trading days as most large down legs did in the last year and in 2008 etc. That means SPX could theoretically rally for another 10-15 days and still have a shot at making a lower low in our cycle time window. However, if the current rally goes beyond next week, many EW counts will likely be eliminated and the next low could prove to be a higher low. So, to get the whoosh that I am anticipating to 1011-1019 in September, SPX should not rally beyond next week or much if any above 1225 with 1190-1215 preferred. That's not so helpful for day trading, but it it should be helpful for swing trading. If one positions for a 10-20% SPX drop from 1190-1215, the odds favor that any rally above 1225 will back test the trade entry range to bail one out of being wrong, so it seems like a high-reward, low-risk swing trade. That's what I plan to do with a little massaging from my System, Dynamic RSI etc, but I don't know your situation, so you'll have to decide for yourself and I can't promise timely updates. There are larger cycles pointing to another low in the first half of October but I currently think that will either be a double bottom or higher low (like a wave B/2). Good luck.
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There are still about 5 possible EW counts, but I'm primarily focused on the first 2. In order of preference for the SPX 1121 pivot, the counts are...
(1) a truncated 5th of 3 from 1371
(2) 1 of 5 from 1356
(3) b of 4 in a triangle/flat from 1356
(4) a truncated 5th of C from 1371 and
(5) a truncated 5th of 1 with 1356 as a truncated bull market top


The reasons for my #1 preference are (1) the October 2008 analogy, (2) unexpectedness and maximum trickery (I don't see count #1 on the blogosphere), (3) double-bottoms in lots of indices, (4) historically extreme oversold readings like CPCE and (5) posd usually needs to develop. The reason I don't favor count #4 and #5 is because TRIN history, all my cycle work and bear market/recession indications favor a lower low in Sep/Oct.


All of those counts could easily reach the 1170s and none of those counts are officially eliminated until 1208 is surpassed, so it's going to be tricky to distinguish them. Everybody will need to keep an open mind, respect stops and trade their indicators, not their hope or prediction. I'll use my System, Fibs, Dynamic RSI, NYADV etc. Specifically, the Dynamic RSI seen at 1347 will likely be surpassed in the current rally in count #1. I'll use daily RSI 4-6 and hourly RSI 28-42. Also, if NYADV forms another small change at an extreme high or scissor top on day 2-3 of the rally, a top is very possible. And, every TICK spike, intraday volume spike and VIX 20dSMA test increases the odds for at least a small pullback.

During the day today, I posted that Dynamic RSI favored 1121-->1141 as 5 waves and 1121-->1152 as a larger set of 5 waves. To end the day, 1152-->1141 was corrective and 1141-->1162 was confirmed as 5 waves. Overall for the day, Dynamic RSI tells me with near certainty that 1121-->1162 did not form a 1-2-3. So, I am left to conclude that 1121-->1162 is either a 1-2-1 or an A-B-C. Obviously, if it's an ABC, the entire rally could be over, but the odds favor that the rally will continue due to its strength and weak retracement percentage under any of the counts above.

I tend to think an overbought pullback is warranted which means 1150ish (or even 1145) could easily be tested on Wednesday with a potentially less volatile session. From there, we're likely to see 1162 exceeded at which point we'll try to determine if it's a wave 3 or ABC extension and the likely time and price target. If 1141 is broken on Wednesday, the System will re-enter short on a 30% retracement and risk a whipsaw loss, because the System does not incorporate EW. I like to back my way into preferred EW counts based on my System cycles and indicators plus Dynamic RSI rather than the other way around, because it seems to be more accurate than most Elliotticians I follow and EW helps narrow targets and is fun to me. Good luck