Wed 12/21/11. Slide Rally Slide.

(Update Fri 12/23/11 1:30PM EST)
System support/short level has risen to 1258.53. SPX has pierced its 200dSMA. NDX has come within 3pts of its 200dSMA. Nasdaq has come within 1pt of its 50dSMA. Dow has come within 13pts of its October high and has a slightly different count for the time being. USD is still slightly above its breakout level. All 5 of those indexes are testing key s/r. 4 of them look like they could use another tenth of a percent or three higher. I don't think I've been good enough to receive a crystal ball for Christmas. ;-)

(Update Fri 12/23/11 10AM EST)
I may post a couple more small comments if we see any significant SPX action or closing indicators, but I wanted to warn you that I will be traveling with family next week and I'm unlikely to post much if at all. I did notice that there hasn't been a 4 consecutive day SPX rally since early September and that 4-5 day rallies have been almost exclusively negative (there were a couple flattish periods afterwards but many severely negative) over the subsequent days in the last year. So, if SPX manages to close positive today, we'll likely get a 1-2% pullback next week even if it's just a backtest/piercing of the 200dSMA. Seasonality and low-volume are wild cards of course. If SPX exceeds 1267.06, my zigzag count to 1293+ would definitely be in the running and I'll consider other counts while also keeping in mind my top 5 intermediate-term indicators. The System took more profit at 1258. Good luck.

(Update Fri 12/23/11 9:15AM EST)
Futures indicate SPX may test its 200dSMA at 1259-1260 at the open. My preferred triangle scenario is against the wall. This reminds me of those football games where my team has a 1pt lead and the opponent has the ball near midfield with 30 seconds left. Rumors are flying that the Fed will extend ZIRP to 2014, but I'm also hearing most ECB funds are not being used on sovereign bonds as hoped. The House did finally agree to the 2-month payroll extension, but that just proves the belief of most people that Congress can't make any long-term solutions. Unemployment claims have been better than expected for 3 weeks although some people believe seasonality and long-term unemployment are the reasons. Durable orders, income and spending were weaker than expected, but the coincident consumer sentiment indicator was up. A mixed bag in the last couple days so probably wise to ignore. USD is still hanging around its breakout level overnight. SPX is within pts of break-even for 2011. OPEX max pain for end of month/quarter/year is supposedly 1235-1240. 1223ish is Martin Armstrong's predictor line for 2012. The Santa Rally period includes the last 5 trading days of December starting today. There are lots of interesting cross-currents here, but SentimentTrader posted numerous stats last night that bode well for coming weeks with -2% being about the worst Christmas week ever. Maybe we'll set another record like we did Thanksgiving week and the week after. But if history is any guide, 1267 is in jeopardy, and it looks like even if SPX stays below 1267, it will probably not drop more than 20-30pts below today's close. In summary, I don't have a clue what's going to happen here since the news is mixed, the seasonal stats are bullish and the cycles are rolling over with resistance just overhead.

The System went long at 1238, dropped to a 50% position size at 1251 and will drop to a 25% position size above 1257. The System stop has risen to 2-candle support at 1252.27 where the System would go short. Although I personally built a 100% swing short position at 1242.5 and 1252, I once again would have been better off to stay long with the System and then go short at 1252 (or higher if SPX continues rallying). Good luck.

(Update Thu 12/22/11 4:45PM EST)
We got the 1-day rally that the last 2 SOS days produced but each such rally and high has gotten weaker. Still, my preferred triangle count is on the ropes. The SPX downtrend line has been pierced but 1267 is the line in the sand to send me back to the drawing board. Nothing really stood out to me today other than the fact that USD and VIX managed to stay fairly flat despite the SPX rally. I'm doubtful we'll get a market decision either way tomorrow before Christmas, but ya never know. Good luck.

(Update Thu 12/22/11 10:30AM EST)
The System took 50% profit on its long position at 1251 and will reload 75% long at 1240 and take 25% further profit at 1257. I am raising the stop to 2-candle support at 1238.14 where the System would also go short. This morning, SPX likely completed a wave C or 3 from 1230 to 1252. I suspect SPX will creep up to the 1255/1256 level seen overnight Tuesday, but I am now 100% personally short for a swing trade with stop at 1268. The US Dollar was actually slightly higher yesterday and again today despite the SPX rally, and they don't often deviate from their inverse correlation for more than a few days so the piper will come calling for one of them shortly and almost nobody but the hard-core bears is expecting an SPX drop over the next 2 weeks. Good luck.
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Played to the tune Mustang Sally which sings "Ride Sally Ride", SPX is about to start the 2nd big slide of "Slide Rally Slide" after the first one lasted from May to October 2011.

Today was an SOS day. http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html?mod=mdc_pastcalendar

The last 3 occurred on Oct 26, Oct 27 and Nov 3 with the latter being the weakest reading. There was a 1-day 2%+ rally following 2 of those 3 days, but SPX was lower 4 days later in both of those cases and much lower 2-3 weeks later. Interestingly, those 3 SOS days occurred at SPX 1242, 1293 and 1261 with the current SOS day closing in the same range at 1244. That tells me big money is likely distributing heavily at 1240-1290 and we could be forming the 4th lower high since it started (1293, 1278, 1267, 12??).

ISEE was very high today. VIX has fallen off a cliff but achieved the last low I was looking for to (nearly) complete a perfect multi-week EDT inside a multi-month EDT. USD tested its ideal 20dSMA support to the penny overnight and then rallied hard back to its breakout level. SPX has now retraced in the ballpark of the ideal 62% Fib for each of its last 3 triangle legs as labeled in my preferred count. And, SPX may have even completed an ABC from 1202 today. Cycles are turning over. The spending leading indicator was projected to top this week or last week +/- with the Shanghai leading indicator portending weeks of weakness, oil portending recession and my bear market indicator portending a retest of 1075 before 1371. Things have setup perfectly for bears. Of course, SPX can rally a little higher, but we have clear lines in the sand at 1202 and 1267. Get ready for the "Slide".

On my public daily chart, you'll see that I am labeling 1293-->1075 as wave A and 1075-->1293-->1159-->1267-->1202-->1245+ as triangle wave B. And, I have been loosely projecting wave 1ofC down to 1050-1100. I can add a little more precision tonight and tweak the targets later if SPX tops a little higher. As you can see on my 3yr weekly chart, I am calling for a 4-5 year triangle X from SPX 667, so I don't expect 667 to be retested and likely broken until 2013-2015.

These are the numbers I am focused on.
1. Ideal triangles: The ideal 60-80% triangle leg retracement of 667-->1371 is 808-949
2. Ideal ABC price relationships starting C from 1245:
1371-->1075=296pts=A
If C=A*1.000=296pts, then C targets 949
If C=A*1.236=366pts, then C targets 879
If C=A*1.382=408pts, then C targets 837
If C=A*1.500=444pts, then C targets 801

3. Ideal Custom Bear Market Indicator lows: 869-956 pivots
4. Ideal price-volume support (see my 3yr weekly projection chart): 850-900
5. Ideal ABC time relationships: C=A in May 2011, C=Fib 5-8 months in May-Sep 2012 (plus the consumer spending high confirms this so far)

Are you noticing a theme? SPX is headed for 850-900 +/- in mid-2012. However, 5-8 months +/- is a long time. So, let's look at some possible interim targets for the projected late January System/T-Theory lows.

1. Fib Cluster: Using 667, 1220, 1371 and 1576 as pivots, there is an unbelievable Fib cluster at 1008-1018 and a smaller one at 1100-1120.
2. Pivot Cluster: There is an unbelievable number of pivots in the last 2 years at 1011-1044 with the most recent low at 1075. There is another cluster at 1100-1150.
3. Price-volume: 1050-1100
4. ABC relationships:
C=A*.382=1134
C=A*.500=1097
C=A*.618=1062

Although there is quite a vacuum at SPX 950-1000 and even somewhat at 900-950 making all the support clusters at 850-900 an obvious magnet, there is less clarity at higher levels. 1100-1120 and 1000-1020 appear to be the strongest support areas, but there is a lot of congestion from 1000-1150. If we assume SPX will eventually drop from 1245 to 850-900 (approximately 350-400pts), my custom FIBBEWIE methodology suggests that the first leg should approach half of that amount +/-. 1245-(150-200pts)=1050-1100. That's in the middle of the 2 supports that I just mentioned, but the October low at 1075 should serve as a magnet too. So, I like 1050-1100 as a January target area with a possible 1-2 day spike lower.

I mentioned that the System would go ahead and try one more long if SPX retraced 30%+ and tested 1230ish maintaining a bullish configuration above the 20dSMA/50dSMA, so the System officially went long at 1238.97 2-candle resistance. I will be taking very quick 50% profits on any gap/surge higher. And, I expect that to be the last System long position until late January unless SPX breaks above 1267.

Although SPX could fall apart at any moment, I think it will close at 1190-1220+ into year end. If 1267 is surpassed, I'll take my 2% personal loss and re-evaluate the bullish and bearish possibilities, and I wouldn't really consider the time I spent above to be a waste because success happens when preparation meets opportunity. Good luck.

P.S. Not that I pay much attention and not that I publicize my blog, but I thought it was worth mentioning that my previous post was my most viewed ever even when taking into account the number of days. I'd say that probably confirms we're at an inflection point, although I suppose it could just mean I've built up a nice story over the last couple months and you are anticipating The End.