Fri 9/9/11. I will never forget.

(Update Fri 9/9/11 5PM EST)
TRIN>5. That's my biggest worry about my count. And, the fact that SPX held at the 1148-1150 uptrend line gives bulls some hope. So, there is the possibility for a bounce on Monday, but nothing else seems very convincingly bullish to me including VIX which just busted above its 20dSMA again but hasn't reached the old 44-48 highs or its upper BB20. And, lots of evidence I've posted in detail favors a sub-1102 low within the next 5-8 trading days. And, the weekend risk is big with the potential for a 3of3of5 down 30+ more points. Index ISEE traders are still bearish and equities option traders got a little bearish today but not near extreme lows at all. I still favor more work on the downside to wash out the holdouts and more neutral equity traders and to bust all the stops at 1100-1120. I'll post again on Sunday night or Monday once I see the weekend news and futures. Have a great weekend!

(Update Fri 9/9/11 1:40PM EST)
I temporarily added an SPX 15min projection chart to my public chart list link on the right. Take a look. It is not my prediction, but it shows 2 potential paths, my support levels and a reference to the 2008 analogy. If SPX bounces hard form 1148-1150, I will draw an alternative scenario involving the same support levels and analogy. If SPX drops further into the close and/or Monday, I do believe we are within 1-2 days of a sharp bounce but it could be from much lower levels. Keep the big picture in mind. Discretionary spending projected a HUGE low this week +/- 1 week. My System cycle allows a few days past that coincidentally into the September 21st FOMC meeting. Any panic drop is likely to flush most people that hung on during the drop to 1102 because they were caught off guard then and the bad news is even thicker now, so a temporary panic bottom is likely within the next 5-8 trading days. I can't emphasize enough that you have a PLAN for various possibilities, so that you can trade the moment on logic and not emotion. Otherwise, you could get caught long in a panic or short in a sharp reversal. I may not be able to post real-time and I might call the bottom wrong, so you need a plan for you. Good luck.

(Update Fri 9/9/11 12:20PM EST)
SPX has broken down. The uptrend line at 1102-->1121-->1140 is currently at 1148ish rising to 1150ish on Monday. There "might" be support there but any 4th bounce is not likely to last long. If that line breaks, I suspect we'll get some support around 1120-1130 because there are 3 recent pivots there and that is the likeliest EDT scenario target. However, the drop from 1204 is looking more impulsive than a 3-wave EDT leg for the time being, and a broken uptrend line would likely become resistance. So, any strong bounce from 1120-1130 would likely be rejected at 1150ish. If the scenario unfolds that SPX drops all the way to 1120-1130 before making a 15-20+pt bounce, the lower SPX targets of 1057 and probably 1000-1020 will look more likely than 1080-1100. At that point, I'd be tempted to call for a 3of5 target of 1050-1060, a backtest of 1080-1100 and then a final low at 1000-1020. If SPX bounces strongly from 1148+, 1080-1100 will still be a highly possible bottom. Of course, I'll adjust targets as the evidence presents itself.

Barring an amazing reversal into the close, I'll likely stay fully short over the weekend despite the risk of intervention, because the EU/ECB has proven itself impotent, the Fed just repeated its wait-and-see attitude yesterday and I can't ignore the technicals which are flashing serious danger of downside. And, I hate to say it, but there is terror risk as well. The VIX is already at 40 and has room to run to the recent high of 48. USD has blasted through its 200dSMA and 76.72 pivot possibly indicating a 3of3 which is when SPX usually pukes as I've posted and charted in months past. SPX is likely running away from its max OPEX pain of 1240...it usually serves as either a magnet or reverse magnet. Germany is in its freefall zone seen on my cross-market chart and most markets are in danger of hitting 5% air pockets about 4-5% lower from here which is around the time SPX would hit 1100. Bulls need to pray SPX does not break 1000 (which I do not project) because there is an air pocket to 900.

In summary, 1148-1150 must hold today and produce a strong bounce in order to keep 1080-1100 as the likeliest target. Otherwise, SPX might not find support until 1120-1130 or 1100-1110 and will likely trade down to 1057ish next week, backtest 1080-1100 and then hit 1000-1020 in front of the Sep 20-21 FOMC meeting. I will consider taking 25% profit on System and personal short positions if SPX reaches the various support levels mentioned, but I will reload on any 8-15pt bounce until I think a bottom is imminent. Good luck.

P.S. I'd like to note that TRIN>4 and NYADV is making a small change at an extremely bearish level. There is a lot stronger possibility for a bounce. However, the almost exact same setup occurred with SPX at 1178 and it gapped down hard bottoming at 1140. The difference now is that we're more likely in 3of5 and the NYADV setup is most potent on day 2-3 of a new trend on we're on day 6 or 7 depending on how you count it. Also, TRIN can spike several times into severe bottoms like it did in Oct/Nov 2008, June 2010 and August 2011 at SPX 1102. So, I think further oversold indications are likely, but we are now seeing some bottoming indicators as we enter the 2nd half of the System cycle low window through Sep 21. It would be wise to decrease leverage and position size as targets are reached and spike downs occur. If I had to guess, I suspect we'll get one more big flush before a large bounce. That could be a 2-3% drop or a 3of3 type 4-6% down day and that could happen today or Monday. For now, 1148-1150 has held. More later.
__________________________
I will never forget 9/11/2001. I will also never forget 1/28/1986 when Space Shuttle Challenger exploded. Those historical events, like many others that sear into our brains, remind us of human imperfection, the preciousness of each moment in life and the fickle nature of success. Although we can and should debate the causes and responses to 9/11, I hope that people occasionally take the time to reflect upon such historical events and even their own family successes and tragedies to become more focused and resolved on the important things in life.

The System opened a short position at 1193 and took 25% profit at 1167. I will reload at 1177ish if SPX gets there. (Update: Just reloaded at 1175 as 1-5min DRSI reached resistance) The System stop is currently at 1198.83 and dropping with each lower hourly close. Unfortunately for America, Obama's speech was extremely light on fundamental change and heavy on more quick "fixes" which are largely unfunded and partly opposed by the split Congress. The analogy about banging one's head against the wall comes to mind. I feel horrible for my 4 kids, but my hope is that whatever pain we have to endure ends quickly like a ripped-off bandage so that my kids get to benefit from the rebuilding and rejuvenation phase. That is what the long-term cycles tell me will happen later this decade, so I am hopeful.


SPX blew through the key 1179 level I mentioned thus gapping through the 20dSMA and 89hEMA/SMA which is typically ominous. But, Tony over at OEW is right a lot more than he is wrong, and he says that the 1168 OEW pivot is the last critical support for his preferred count calling for another rally towards 1260, and a gap fill and intraday reversal at this point on a patriotic day with time running out on a 3of5 down would likely be very bullish especially since any apparent wave 3 down can be a wave C. So, bears need to finish the job by breaking below 1160 after the morning bounce. For the time being, my preferred counts which called for a wave 4 at 1231 are gaining strength but must seal the deal.

Let's make some target estimates using what we know. 1231-->1140=91pts. Assuming that was wave 1of5of3/C from 1371, wave 3 is most likely to exceed 91pts but an EDT is possible. In the case of an EDT, a 70-80pt drop to 1120-1130 seems most probable, so it will be a big deal to see the previous 1118-1121 pivots broken. Once 1120 is broken, SPX wave 3 would likely reach a Fib multiple of wave 1. 1204-(91pts*1.24)=1092. 1204-(91*1.38)=1079. 1204-(91*1.62)=1057. So, our previous 1080-1100 target area still looks good with more aggressive FIBBEWIE-supported targets near 1057 and 1000-1020 at the completion of 5 waves down from 1231.

If we assume SPX 1080-1100 is the wave 3 target, then it would be about 105-125pts in length. Reverse-engineered FIBBEWIE would suggest that wave i of 3 should reach 1135-1155, so once again, it's probably very important that SPX breaks below 1160 today or Monday. Although a wave ii rally from sub-1160 could rise 30-40pts back up to the 1187 OEW pivot area, I suspect we are reaching the point where all rallies will be on the weak side until SPX breaks 1102 and possibly much lower. (Update: And, keep in mind that the lower targets of 1057 or 1000-1020 would likely require wave 3 to go much lower in which case we could see some nested mini wave 2s. In other words, whether we get small nested 2s or a large weak ii of 3, the rallies will likely be short-lived and dangerous to trade until a flush is more obvious especially once 1160 is broken which SPX nearly touched at 1161 just now) Good luck and never forget what's important to you.