(Update Wed 12/14/11 2:45PM EST)
The System is now long with a stop at 1203 (.5% below 1209.83) and it ain't lookin' good. On the bearish side, we have the 1180-1200 triangle target, the 1209ish gap line, the negative news backdrop, possible credit downgrades and minimal bottoming indicators today. On the bullish side, we have numerous positive divergences and near-term oversold indicators, OPEX max pain, seasonality, a possible payroll tax cut extension and the likely need for a few more days to a mid-cycle low. In any event, I believe the price action and cycle action supports a target of 1180-1200 over the next few days or so, and the main question is whether we first get a 20+ pt bounce or not. Good luck.
(Update Wed 12/14/11 12:10PM EST)
Interesting tidbit. The gap/pivot line (from SPX 1344 in February) that I've had on my daily chart since early June is at 1209ish today. Will it cause a temporary bounce pivot or large gap down? IDK TBD. System resistance has dropped to 1218.90 for a long entry.
(Update Wed 12/14/11 10:10AM EST)
If SPX closes below 1225.85 at 11AM, the System will go temporarily conservatively long on a 2-candle hourly resistance break at 1225.85. The break of 1219 makes the LDT pattern less likely but it served us well. With each SPX point lower (currently 1215 at the lower end of the OEW 1222 pivot), the odds for the triangle count increase but so do the odds for the most bearish wave 3 count and I won't feel 90% sure about eliminating the 1293+ zigzag count until SPX reaches my 1180-1200 triangle leg D target zone and better yet after a backtest failure at the 20/50dSMA. There are a bunch of positive divergences this morning and, unless SPX really craps the bed in the next few hours, I still think seasonality and OPEX could peg the 1230s on Thu/Fri with a possible temporary overshoot. The wildcards this week are the imminent credit downgrades and payroll tax cut extension. Intermediate-term traders should position short on rallies with a stop at 1267. Good luck.
____________________________
SPX held key support at 1220-1230. The 2 preferred counts on my public daily chart are both still alive. However, today's action probably bumped up the odds for the triangle count from 60/40 to 70/30, because the drop from 1267 now looks like an LDT wave A and the next System mid-cycle low is projected for Christmas +/- and is likely to be corresponding wave C. Daneric has an interesting 3-3-5 count that turns the LDT into an EDT, but irregular flats and really early cycle lows are both less common than the alternatives.
Ideally, I'd like to see a rally to the 1240s into Thursday followed by max pain at 1235-1240 into Friday OPEX and then a drop to 1180-1200 on Mon/Tues/Wed to complete triangle leg D for a triangle started at 1075. The primary problem with my whole triangle scenario is that US Dollar sentiment is extremely bullish. I certainly think USD could still rally to $81-82 supporting the SPX drop to 1180-1200 since USD did breakout. However, it probably needs a breather after that and I'm not sure SPX would only rally to 1220-1260 in a triangle wave E if USD fell very far. So, that concern plus the fact that SPX held 1220-1230 still makes the zigzag to 1293+ a realistic possibility. My gut tells me that a small USD breather to backtest its breakout (and thus a small SPX rally) is all that is needed to relieve USD sentiment enough for a 2008-style 3-4 week blastoff forcing SPX into the mid-to-late January System cycle low. I say that because I believe Europe and the Fed are pretty much on neutral now into late January, nothing was solved and the problem is more serious than most want to admit. Plus, take a look at Mish's recent articles which give many fundamental reasons for a potential 1+ year US Dollar rally including China, commodities, Europe, world recession/fear, increasingly easy Europe, increasingly running-out-of-options Fed, etc etc. not to mention that USD likely completed a 3-year cycle low in 2011 and formed a 6-12 month basing pattern of accumulation. So, I guess you could say I think there are cyclical fundamentals that will help drive the US Dollar higher for the next year and only cause hiccups on overly bullish sentiment.
The LDT count will not follow standard guidelines if 1219 is broken. The triangle-from-1075 count will be highly unlikely if 1267 is broken. Good luck.
No comments:
Post a Comment