Mon 9/19/11. Nasdaq 66.6% drop?

(Update Tues 9/20/11 9PM EST)
I'm trying to meet a work deadline so I have little time. The System is still short with a stop at 1227 (.5% above 1220 rounded) until 1188 is closed below on an hourly basis. What could have been considered a 5-wave rally from 1136 to 1220 is now certainly an ABC if SPX drops below 1188. Of course, today's rally could prove to be 1 of C/3 if the FOMC sparks a continuation higher, especially since today's low TICK and NYAD suggest a short-term oversold condition. However, there are negative RSI divergences on the 60min charts and lower, and many other indicators are still in overbought territory in bear market conditions. I'll leave my public daily chart count preferences as is. The recent rally to 1220 is a close enough retest of 1231 to reset the trading day count for the last down leg in an 8%+ down trend. If today was Day 1 of the last down leg, the average for a dozen such cases since 2007 suggests that SPX will bottom on September 30th at 1175. The System mid-cycle low and 4 other longer-term cycles are projecting "a" low between September 29th and early October. Still, the FOMC announcement should spark some wild movements and probably clarify the count once the dust settles after a few hours or maybe a few days. So, U.S. citizens like me sheepishly wait to see what the unelected, bank-driven, unaccountable Federal Reserve has planned for the indebtedness of my family and future generations. Good luck.

(Update Mon 9/19/11 4:30PM EST)

Take a look at http://www.zerohedge.com/contributed/graham-summers%E2%80%99-weekly-market-forecast-market-crash-edition.

Although Phoenix Capital tends to be sensationalist and self-aggrandizing, I agree with the technical and fundamental premise. I may have to eat some more humble pie which has fattened me up over the years, but that's just how I see things. Mr. Market keeps taking things to the edge of bullish technical breakouts like he did at 1356, 1347, 1231 and possibly 1220, but downside pressure has prevailed each time thus far. Perhaps, I am more bearish than some in that I envision a highly possible "double crash" to sub-1020 as I've described for a month or so, but I may also be more bullish than some in that I expect a 10-20% bounce starting by early October and possibly as soon as the last few days of September due to my System mid-cycle, long-term cycle and discretionary spending analyses.

Having said that, today's action was not convincingly bearish, and most of my indicators finished fairly neutral. The most bearish counts and the 1231+ count are all alive. If 1220-->1188=32pts was a wave A/1, then the next leg down will be equal at 1177ish if SPX heads straight down from the late afternoon 1209 high. Otherwise, a rally up from 1188 would equal half the size of 1136-->1220 at 1230ish. US Dollar and Bonds faded late in the day and will need to rally again for stocks to breakdown. Even if SPX does break down, I don't think any count will be eliminated, so we're likely going to have to wait for the FOMC decision to get any technical clarity. Greece will probably announce another agreement tomorrow but nobody should believe it will be effective for anything other than a quick drug hit. Good luck.

(Update Mon 9/19/11 12:30PM EST)
The System went short at 1198 after support was broken more than 1% below the top and then the top was retraced by 30%+. The System stop will be above 1220 until we see hourly closes below 1190, so the risk is about 2% and 1 or 2 whipsaws are possible but doubtful. With the FOMC meeting upcoming, I'll be quick to take 25-50% profits if given a good opportunity. I haven't had time to evaluate technicals today. Maybe later. Good luck.
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If Nasdaq were to fall half as much as it did in 2000-2003, it would reach 875 from today's 2622. That would be a 66.6% drop from here. I added a chart to my public chart list with a potential Nasdaq EW count from year 2000. I did not take the time to study tech/SPX divergences, but you can compare my long-term Nasdaq count with that of SPX on my public 3yr weekly chart.

It appears to me that Nasdaq will make 5 waves down from 2011 into late 2012 or 2013. Since Nasdaq overlapped its June 2011 low and retraced 50-62% of the top while SPX/Dow did not, I suspect Nasdaq is in a 1-2-1-2 with an imminent wave 3 down. SPX could be in the same count but can also be in the 1-2-3-4 count that I've had for weeks. If so, SPX could reach 1220-1260 after making a sub-1102 low while Nasdaq may not exceed its September high forming another deep nested wave 2. Then, the 2 indices would be in sync for a wave 3 down.

Regardless, DRSI has not confirmed that the SPX downtrend from 1371 or 1356 is complete. So, SPX can be in a lengthy wave 4 (possibly a triangle) as I've preferred OR it can be in a 1-2-1-2. I have not added the latter to my public daily chart yet largely because there are strong reasons for support at 1000-1100 and longer-term sentiment has gotten very bearish and my discretionary spending analysis favors a 10% bounce from September, but it is a possibility especially if Greece defaults and I'll consider it more seriously once 1102 is broken. I've mentioned that a break of 1000 could lead to a quick swoon to 900-950 due to a huge price-volume air pocket almost the same as the one SPX hit below 1250 in Jul/Aug.

Short-term, the Wednesday FOMC meeting is a wildcard. Operation Twist is almost 100% baked-in with some people looking for a little more or less than that. For many reasons, it's hard for me to see much stock market upside on the FOMC decision although short-term spikes are likely. Still, it's a wildcard. September 12th likely marked the System cycle low and SPX should head lower imminently into the mid-cycle low projected for September 29th (has run long recently) and 4 other longer-term cycles scheduled for early October. The typical last downleg that I described earlier should be reset now that SPX has nearly retested 1231. The average last leg is 9 days long and 1.3% per day which gives us an average projection of 1075 on September 29th assuming SPX topped at 1220 on Friday. Good luck.