Mon 9/12/11. The Next Drop Won't Stop.

What I mean by "The Next Drop Won't Stop" is that the next SPX drop should not lead to an immediate rally or consolidation like keeps happening over the last few weeks. If my 15+ pieces of evidence from yesterday regarding time and price projections are going to play out with the odds, then bears need to strike on Tuesday (maybe Wednesday at the latest) to kickoff the heart of wave 3 of 5 of 3/C down from 1371. Sure, SPX could rally on Tuesday to 1165ish or even 1175-1180 where the 20dSMA and h89EMA/SMA reside, but if SPX rallies much above that or beyond Wednesday, then alternate scenarios will need to be explored. My projection is for a swift 1-2 day drop of 68+ pts to 1080-1100 (or possibly 1057ish) starting Tues/Wed and then further damage for 2-4 more days, and, if that does not happen, I will likely be expecting either a wedge to 1120-1136 or a further corrective rally to 1204/1231+.


The System entered short at 1193 and has improved its position by approximately 10pts by taking 25% profits on gap downs and reloading higher. The System went 100% short again at 1161 near end of day. I placed the System stop at 1163 which is .5% above candle resistance. SPX almost broke that level into the close. If SPX gaps up, I will not immediately close the short position. As usual, I will evaluate the gap opening level and use a logical resistance level within .5% of that (edit: or at the the next pivot/MA). The trade is currently 41pts in the green, so it's sitting on profit with the market in a near-term overbought state just below resistance.

Today's SPX/VIX/USD reversal looks pretty good from a candlestick standpoint but nothing is confirmed. It's like a football game coming down to a few plays in the red zone in the last minute. It's make or break time. Good luck.

P.S. If you want to see a chart and discussion of a possibility I referred to earlier today, check out the OEW link at the right and Tony's new SPX 60min chart count. At this point, I'm still retaining the preferred count that has worked for me for several weeks, but I always like to acknowledge the possibilities to keep my trades honest. If 1121-->1231 was an ABC and 1231-->1136 was an ABC, then we will likely get a rally above 1231 to 1240-1270, and that rally could potentially even be 5 waves if you support the current 85% retracement as a 3-3-5 flat. If SPX were to rally 100-130pts from 1136, FIBBEWIE would suggest that the first large wave up should be 45-65pts to 1180-1200. Considering the OEW pivots and recent price pivots in that range, that makes sense. And, it just so happens that my preferred scenario is expecting the current rally to fail at 1162-1182. So, OEW's 1187 pivot is probably the ultimate line in the sand for these 2 counts, although anything above 1175-1180 gets worrisome for bears. If we see SPX pull back strongly from sub-1180, then I'd still lean towards my preferred count or possibly the wedge into 1120-1136 with Tony's count as a 3rd or 4th alternate count. That's just food for thought. Good to be prepared.

Also, ISEE=81 today which is fairly low and normally somewhat bullish for SPX, but, once again, "smart" traders were very bearish while "dumb" traders were somewhat bullish. TRIN/TICK/NYAD/VIX all backed off oversold levels today. So, bulls really need to push things up (1180+ sounds good here too) or else today's rally was just another temporary relief rally to fool the dip buyers again.