I have created spreadsheet calculations to identify and quantify my cycles and many of my key indicators. I still have a little more work to do there, but I played around with potential scoring of those numbers and charted them. I found a good fit for the last 2-3 years that projected pretty well for 5-10 days, but it did not backtest well beyond that and mid-to-late January 2012 was one of the largest aberrations. So I will continue to build my indicators and backtest scoring metrics. Ideally, I'd create a regresssion analysis engine to find the best correlations and I may need to incorporate dynamic variables based on volatility or volume. This is probably going to take months to do it right because I also want to incorporate reversal triggers like swing candle days and/or TRIN spikes etc, because even when cycles and indicators get you close to reversal points, a sell/buy decision that is off by 2 or 3 days can often make a big difference in profits.
Having said all that, the scoring system I've tested thus far has been reasonably predictive for the last year or so and it projected a sizable drop in the 2nd half of January followed by a 1+ week bounce and then another sizable drop. The late January drop was much milder and more delayed than expected but key levels like the 20dSMA were never broken and it's my intent that the Scoring System would not likely have shorted under such a bullish trend. But, I have not gotten far enough to establish guidelines for trading the scores. The current projections suggest SPX should be topping out any day now and pulling back fairly sizably for 5-10 days and perhaps there is some pent-up weakness delayed from late January. But, it's probably a dangerous shorting opportunity until SPX closes again below the 10dSMA or breaks the 20dSMA. And, once the next low has completed in a week or two, it appears there will be little downside cycle pressure for 3-4 weeks after that. So, if the next low is deep (probably needs to reach the 1260s or lower), we should at least get a strong rally back to key moving averages/Fibs, and if the next low is shallow, we should test SPX 1371+. That's my preliminary analysis based on how my scoring system elements typically work.
My consumer spending analyses suggested a significant 4+ week, 8%+ top by Feb 13th. That would fit with a top this week or last week and a fairly steep drop in the next couple weeks that does not rebound to a new high. Given my bear market indicator and the consumer spending analyses and my cycle/wave work, I tend to think SPX will complete a 3-3-5 flat or 3-3-3 triangle leg from 1371 back down to 1000-1100 by summer. If 956 is broken, the bear will continue into late 2012 or even 2013-2014. If not, we should either get a continuing sideways triangle for a couple years or possibly a bull market rally to new highs. More soon. Good luck.
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