Mon 11/28/11. Thankful.

(Update Wed 11/30/11 8:20AM EST)
Surprise central bank coordination. Favorable ADP private jobs number. ES futures indicate that SPX will hit the 1220-1240 target zone today. Y=W*1.38 at 1238ish. Although the market could form a top price-wise today on good news like it did with Bin Laden's demise, it doesn't fit my timing band, so I suspect Wed/Thu will complete the 1st zigzag with a 25-50% retracement and then a 2nd zigzag to come over the next 1-2 weeks whether that's part of a triangle or 1-2-1-2. 1200ish should become temporary support again. Perhaps I was a bit too cautious by reducing the System position size to 50% yesterday, but I was playing the technical odds and missing some extra profits is better than the losing alternative. The System will reduce its long position size to 25% after the open and reload to 50% after a 12pt retrace. Good luck.

(Update Tues 11/29/11 4PM EST)
Although I think there is a good chance that 1159 is the bottom for 2-4 weeks, 60min DRSI stopped rising at the same level seen at SPX 1264/1267 and 1227 was not overlapped, so there is the potential for 1293-->1215=A, 1215-->1278=B and 1278-->115?=C with wave 4 of C just completed at 1204. Also, 1159-->1204 looks like an ABC thus far and could turn into a larger 3-3-5 flat that retests/pierces 1159. And, if SPX rallies to 1204-1210 on Wednesday morning, it will look like an LDT wave A which should lead to a B-wave 30-60%+ retrace. So, there are short-term bearish and bullish counts that suggest 1150-1170 could be legitimately retested. That's the problem with corrective structures. So, the best thing to remember is that the System cycle was projected to form a momentum low on Nov 25 +/- with a sideways to up bias likely for 2-4 weeks after that and my spending analyses and seasonality confirms that same scenario. That means the System recommends long mode for the short-term, but, since SPX has not exceeded its key moving averages and the larger trend is down and end of month has been dangerous recently, the recommendation is very cautious with frequent profit-taking and a probable target of 1220-1240 over a very choppy 2 weeks. Good luck.

(Update Tues 11/29/11 10AM EST)
As of the higher 10AM closing 60min high, System support has risen to 1184. The System took 50% profit at just above 1197.35. 1200-1208 is where C=A*(.38 to .62) from 1159 so risk is high for a 1-2%+ pullback if SPX cannot break through the 50dSMA at 1205 and if VIX climbs back above its 20dSMA at 32.21. The System will reload 100% long at 1185-1189 and stop out at 1184 awaiting the next long entry point, and the System would take another 25% profit at 1209. Good luck.

(Update Tues 11/29/11 9AM EST)
Looking at the daily closing data, NYADV is extremely overbought, VIX is sitting on its 20dSMA and TRIN hit its lowest level in over a year. Cobra (see my favorite links) offered several stats that favor downside over the next 2-3 days after a possible brief pop first. Frank Hogelucht has been periodically publishing odd stats at Safehaven and has a couple bearish ones for the rest of this week although his bullish stats for last week did not pan out. Odds are just that...odds. Yesterday, I mentioned that I favored a choppy, complex rise to 1220-1240 over the next 2+ weeks. To do that, SPX may have to largely retrace or even pierce 1159 to drag things out. A morning rally to 1197+ could complete an ABC from 1159 or possibly the 2nd leg of an irregular flat just below the 1205 50dSMA. Essentially, I'm saying to be cautious for the next couple days, but I expect the rally to push through 1200-1205 after that. The overbought stats don't always lead to 1-2%+ pullbacks but 80%+ odds cannot be ignored. I will move the System to a 50% long position size at 1197-1198 or a 75% position size at 1189 and 50% position size at 1184 depending on which direction SPX goes. Good luck.

(Update Mon 11/28/11 3:50PM EST)
The System took 25% profit at 1189 and reloaded 100% long at 1185 as planned. SPX is hanging around the OEW 1187 pivot and nearly retraced Fib 38% at 1183. That is a good spot for a bounce in an ABC leg of a triangle, but 1173-1178 corresponds with a 50-62% Fib retrace and 1168-1176 completes the OEW pivot cluster if SPX wants to go lower. If this morning's rally was a wave A and SPX bottoms today or tomorrow in wave B, that means the whole ABC off 1159 would only take a week or less. If my triangle scenario is true into mid-December, the first ABC leg took nearly 4 weeks to 1293 and the second leg took nearly 4 weeks to 1159, so a 1-week or smaller wave C (typically a more complex triangle leg) does not seem to fit. So, if SPX reaches 1220-1240 too quickly, that might make my alternate counts (1 more immediately bearish, 1 more short-term bullish to 1300ish) a little likelier, but I suspect SPX will rattle around for 2+ weeks to 1220-1240 in a complex fashion. The System's key moving averages (50dSMA, 20dSMA, 89hEMA/SMA and 200dSMA) reside at 1206-1266 and should provide resistance. Accordingly, I will take profits frequently in the long position especially above 1205 and keep reloading on 10-12pt pullbacks until I see some topping signs and/or a support break.

In keeping with my projections, it is noteworthy that the next FOMC meeting is scheduled for Dec 13 and I believe there is a key European meeting/deadline on Dec 9. My spending analyses suggests that SPX should top 15-16 weeks from Sep 1. That equates to the week of Dec 5-9 or Dec 12-16, so I think it's fair to expect a significant top on Dec 1-20. For a month or so, I've been projecting a higher high in mid-December as all the previous spending-induced tops have done since 2007, but the previous occurrence projected for the first week of May (dead on!) had the weakest higher high similar to the spending-induced top in October 2007 and, although a triangle would not produce a higher high, it would complete a pattern into December at a lower high and reasonably fit a weakening stock market that confirmed a bear market a few months ago. Since a bearish triangle often briefly bounces off its lower boundary before breaking down and often backtests its breakdown level, it is possible that SPX could complete a triangle in mid-December and then bounce back to the triangle levels into the end of year to keep annual mutual fund statements from looking bad prior to the hedge fund redemptions I expect to to be fulfilled in January. There is an FOMC meeting on Jan 24-25 with OPEX on Jan 20 and the kickoff to earnings season in that same time frame. Given the System cycle low projection on Jan 18 +/- plus OPEX, the FOMC and earnings, I think late January will likely start an 8-10% rally as it has for the last 4 years especially if we get a retest of 1075 as I suspect. If the System can catch a big chunk of those moves, we should see Jan/Feb monthly profits approaching 15% like Aug/Sep with a choppier December. Regardless, I think the odds of breaking 1293 are slim, and even if that does happen, it will be short-lived, so I will be personally transitioning from long mode to short mode in the first half of December with February put options (just in case things drag out or my short-term bullish alternate takes hold) and hopefully my System will be a good guide as to when to push hard on the peddle. Currently, SPX is below ALL of its key moving averages, so there is stronger sudden bearish risk until that changes. Good luck.

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I am thankful for the time I spent with family and friends this past 4 days and I look forward to a memorable holiday season. I wish your family health, wealth and happiness.

I reviewed my last post and realized it was a bit confusing. You can go back and read the details if you like, but I'll try to summarize my primary points.

1. From the inception of the United States of America in 1776, the economy formed a momentum peak in the year 2000 as measured in multiple ways, and the stock market is now in wave 4 of 3 corresponding to wave 2 of 3 experienced in the 1930s Great Depression.

2. Wave 4s are typically longer, more choppy and more shallow than wave 2s as witnessed at lower degrees in the 1970s and 2000-2003, and that means the current high degree SPX wave 4 is likely to form a complex pattern with triangles and double/triple combos from 2007 to 201? not matching the 80-90% retracement of the 1930s and likely not repeating the sharp zigzag pattern in the 1930s especially with the kick-the-can anti-deflation government and central bank mantras to avoid repeating a depression.

3. As now seen in my public 3-yr weekly chart, my primary count from 2007 is that SPX finished W in March 2009 and is now in the middle of a long 3-5 year X wave triangulating between 1576 and 667 before capitulating in a final wave Y down into 2014/2016. I am not so much stuck on the sideways pattern being a triangle as I am favoring alternation with the 1930s and thus leaning against my alternate count which is a sharper zigzag.


4. Short-term to intermediate-term, you can now see my counts on my public 60min and daily charts, and they suggest a possible triangle into mid-December with an alternate new high to 1300ish. A triangle would best fit my view of worsening economic fundamentals, long-term cycles and sentiment favoring a bad 2012 with positive short-term cycles, intermediate-term spending cycles and technicals favoring a rally into mid-December.

The System is currently long from 1171 on the day before Thanksgiving and will take 25% profit after the open today. The System mid-cycle low was projected for November 25th +/- and it may have hit the bullseye. The System profited approximately 15% in August and 15% in September, lost 1% in October and is now up about 8% for November as of today's open. Amazingly, that has occurred despite only going long once and missing the entire October rally which I almost called to the day but couldn't pull the trigger on the 4-5% 1-hour rally and then decided not to chase. As I announced last week, now that the mid-cycle low has now been lower than the cycle low 4 times in a row, I have switched them. Assuming last week formed  the momentum cycle low, the next cycle low is projected for Jan 18 +/- near OPEX with a mid-cycle low on Dec 23 +/-. That means SPX could trade up-to-sideways for the next 2-3 weeks followed by a small drop into Christmas. Then, Christmas to New Year may be the typical low-volume sideways to bullish while the first 2-3 weeks of January could be a doozy downer testing the 1075 lows before bouncing and then reaching my primary 850-900 target in mid-2012. All of that fits into my triangle/sideways scenario into mid-December and a larger triangle/sideways scenario into 2013/2014. Short-term, SPX could reach 1220-1240 which would shake out a lot of the recent bearish 3of3 calls. Good luck.