(Update Thu 9/29/11 4PM EST)
Hmmm. It never ceases to amaze me what happens when VIX is up this high. The moves are nuts. The System is reloaded to 100% short at 1150 with original entry at 1188 and cost basis at 1194ish. The System resistance has dropped to 1166.21. There is a risk it will get gapped over in which case the System will choose a pivot/MA above the gap as a stop. SPX retraced 50%+ of both large drops today, so the nested 1-2 setup is still very possible, but we need to see a strong wave 3 down imminently. 1166/1176 are probably key pivots for Friday and they line up with OEW 1168/1176. There was a large surge in SPY volume over the last 30 minutes as SPX skyrocketed. The same thing happened in reverse the last 2 days and led to gap ups, so there is a good chance for a large gap down on Friday. However, I find it interesting that SPX ended about where it was when Europe closed which might suggest Mr. Market wants a fairly flat open for end of month/quarter OPEX. Flat or down open is my guess. No 5th large gap up in a row. NYAD formed a scissor formation and TRIN/VIX dropped with a potential nested SPX 1-2-1-2- formation into the last few days of our cycle low window, so bears do have a pretty good technical setup, but they need to strike quickly. Good luck.
(Update Thu 9/29/11 2:40PM EST)
The System will reload from 75% to 100% short if SPX reaches 1150. It would be an 8pt bounce and looks like a backtest and that's the last spot it took profit anyway. Based on 5 other drops in the last 2 days which have been 18-27pts, I expect the next big 1-hr down leg to reach 27+pts. From 1150ish, that would reach the 1120s easily which is kinda where I thought SPX might bounce first based on other reasons. Good luck.
(Update Thu 9/29/11 2PM EST)
System resistance remains at 1180 but will fall to 1176 and then 1166 if SPX falls for the next couple hours. The System reloaded from 75% to 100% short at 1172 and then went back to 75% short at 1150. It's trading in and out of 1-2% moves especially near pivots maintaining large exposure for the expected drop until stopped out. The System will reload 100% again if SPX reaches 1162 and will go to 50% short if SPX reaches the 1120s waiting for an 8-12pt bounce.
Window dressing is likely over. VIX and SPX are fairly flat for the day now. Tech is looking horrible. Small caps are relatively weak. Financials and banks are holding things up. If they give in, I think we'll finally get the 3of5 40-50pt SPX drop we've been anticipating. In that case, the first stop would likely be 1120-1130 followed by a brief bounce and then chop to sub-1102. Then, we'll look at the charts to determine if 1050s is in the cards or not. I think going long at the 1090s is extremely risky because 1050s or even 1010s is possible and I don't see real good stops until about 1040 and 990. However, staying short at the 1090s is risky because the downside is probably limited to the 1050s or maybe 1010s and I'm expecting a monster rally to 1200-1250 making the risk greater than the reward. Probably a butterfly option trade would be good there. My strategy will likely be to take profits at the 1090s, wait for a large 20-30pt bounce to possibly go short again to reduce my risk/stop and then wait for the 1050s or a System signal to go long. I may miss a nice 5%+ move up or down, but I may not and, even if I do, I'd rather do that than be caught on the wrong side of a 10% move which is also possible in either direction. I will also consider staying 25-50% short at the 1090s as long as the System is short. Good luck.
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Time is running out on consumer discretionary spending for September as reported in my public links on the right and charted on my public weekly chart. It is a virtual certainty that September's spending growth will be a little less than August which ended a skyrocket ride. In turn, that means September 1st likely marked the beginning of a new spending pivot top (needs to be confirmed over the next 1-2 months) which projects a significant SPX top in mid-December (judging previous pivots in the last bear market) or late-January (judging previous pivots in the last bull market).
The last spending pivot was a bottom on March 1st projecting an SPX bottom in the 1st week of September +/- to be followed by a 10%+ 5+ week rally. The trend has been for such bottoms to be more and more retraced before a stronger rally can take hold. That would potentially allow for a lower low in the 1090s or 1050s as I've proposed for other reasons. However, the new tentative spending signal suggests SPX upside pressure into Dec/Jan. A Dec/Jan top could be a lower high, so one possible path would be a wave A lower high to 1250-1300 in Oct/Nov followed by a B wave to 1100-1200 and then another lower high to 1200-1250 in Dec/Jan.
Although I don't expect to nail the details, most of the high level technicals I follow favor a 2-4 month rally to lower highs once the current bottoming process is done in the coming days and consumer discretionary spending has been a great leading indicator. My high-level analysis certainly nailed the general path back in early June (see the untouched projection path on my public weekly chart) and did pretty well back in late 2010 (see the untouched projection path on my 3yr weekly projection chart). There is tons of swing trading money to be made in such analysis if you have the patience, fortitude, reasonable use of leverage and money management skills.
I'll update my intermediate projections in the next weekend or two now that my 3-month and 1-year projections are coming to a close, but for now I'll throw out a few of the ideas circulating in my head.
now to the Oct 5th = bottom at 1090s, 1050s or possibly 1010s for a million reasons I've posted
Oct 19th OPEX = max pain at 1200+
Nov 2 = FOMC meeting not likely to do much if stocks/houses/spending have rebounded especially with dissenting votes and Operation Twist in full effect = temp bearish pressure
late Oct/Nov = Congress debates heat up over budget into late November deadline and final European parliament votes occur = uncertainty and/or taxes and/or austerity = temp bearish pressure
late Nov to early January = relief from Congress debates + seasonality + Christmas rally + relief that the world didn't fall apart in 2011 + window dressing for 2011 to approach opening 1250 in 3rd presidential year + discretionary spending relief indications = bullish pressure
Dec 13 = FOMC meeting not likely to do much unless jobs are suffering and inflation is tame = up in air but they may do something small
Jan 24-25 = FOMC meeting not likely to do much if year end rallies like I expect but no Fed + overbought rally in bear market = bearish pressure
Mar 13 = FOMC meeting likely to act if stocks sell off in Jan/Feb/Mar as I expect = bullish pressure causing the final rally before things fall part in summer 2012 just like 2009, 2010 and 2011
late 2012 to early 2013 = lots of projected cycle bottoms + election relief + oversold market + Fed QE? = strong bullish pressure
Good luck.
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