Apple has now retraced Fib 38%+ of its April 10 high. Its sharp drop on Monday started a few pts higher just beyond a 50% retracement, so maybe Apple will test that especially since the rebound is so much shorter in time. But, SPX has now reached the 1390s and its own 50-62% Fib retracement zone with strong resistance at 1398-1400 and USD is not giving up the ghost which defies the typical inverse correlation, so the SPX rally should be near an end if its bearish downtrend is not over. Tax day is historically bull friendly but the day or two after tax day are supposedly not and this is OPEX week, so SPX should pull back 10+pts soon and then bounce around settling near max option pain which is supposedly at 1383-1393. And, I wouldn't expect the next strong wave 3 down (or up) until the FOMC announcement. That is why I am building a short position in the 1390s but will take partial profits frequently on any 8-12pt drops for the next week if I am so fortunate. I will likely cut bait at 1401.61.
(Update Tues 4/17/2012 10AM EST)
A triangle 3rd leg near 1385 or a double ZZ in the 1390s appears to be most likely. A triangle and 30-50% retracement fits a B wave better. A double ZZ and 50%+ retracement fits a wave 2 better and would match Dow. So, if you are leaning towards 1422 being the bull market top, you should probably hope for the double ZZ to the 1390s. I lean that way slightly because Apple looks like it may have completed a wave structure on Monday and needs a more sizable bounce and the triangle count would require a breakdown well before the FOMC announcement next Wednesday. But either are possible, so I will build a new short position in the 1390s or on a 4-hour candle breakdown if that comes first. If 1422-->1357 proves to be a wave 1 instead of A, then the remaining waves would typically break SPX 1320 whereas C=A would not. So, we have another technical tool that says 1320ish is important for projecting the remainder of the year in addition to the reasons I gave the other day. Good luck.
(Update Mon 4/16/2012 5:30PM EST)
Something smells funny. ISEE closed very low at 65. TRIN was still above 1. SPX closed right on its wave 2-4 channel line (parallel to 1267/1422). VIX closed just below its upper BB20. The SPX cycle low possibly occurred last Tuesday but can still occur Tues/Wed. Apple may have washed out to complete a wave 3/C or 5 into the close. Dow came within pennies of breaking Thursday's high. OPEX week and tax day hve a bullish bias. USD closed just above its 20/50dSMA. SPX is kinda setup to either dive or rally hard, but something tells me all the forces are going to cross each other out and give us a lot of chop at 1350-1390 for a few more days.
(Update Mon 4/16/2012 3PM EST)
I've had a pretty good feel for the market in recent weeks. Believe me, I know it comes and goes, and I'm still learning that part of good trading is knowing when you are in sync and when you're not. The intraday count for the last couple days is difficult as many corrections are and Dow may still need to break yesterday's high (it fell pennies short), but most of the evidence supports selling the rallies including Apple's technicals.
One new thing I want to note is the US Dollar. The USD coiled in a $4 range for 6 months last year culminating in an $8 rally that crushed SPX to 1075 in October 2011. Well, it has coiled again in a $4 range for the last 5+ months and given that it is in the middle of the coil, it will likely end up being 6 months before it breaks out like 2011. It sure looks to me like USD will enter a wave 3 up after a series of 1-2s for the last year OR maybe just a C wave as part of a double ZZ. In either case, I favor the USD breaking upward. If it's a wave C with marginal new highs, SPX could hold up at 1290-1320 as I've projected or possibly a little lower to the 200dSMA, but if USD is starting a wave 3 up, then the spending cycle lag will almost certainly have topped at April 2nd (estimated week of April 9 +/-) instead of the alternate projection of June 1 and my cycle lows at May 3ish and June 4ish would likely turn out to be lower lows as Terry Laundry is suggesting. USD is flirting with its 10/20/50dSMAs today, so whether they become support or resistance could be a huge clue. Maybe we get choppiness through OPEX and the Fed meeting which would allow SPX to hang around 1340-1390, but I'd expect a strong USD reaction by the middle of next week. Good luck.
One other small thing. I saw a chart the other day that showed every presidential cycle since 1960, and I don't remember a single one having all 4 years positive. And, the 4th year was usually pretty flat. So, the presidential cycle, business/economic cycle, inflation cycle, breadth cycle, annual seasonal cycle and the world's can-kicked financial problems may be converging in which case SPX will almost certainly test/break 1260ish and its 200dSMA by end of year if not summer. That might be helpful to keep in mind for multi-week swing trading as SPX reaches extremes.
(Update Mon 4/16/2012 10AM EST)
SPX reached 1378-1388, but Apple dragged everything down. AAPL looks like it is in a wave 3 down but may be finishing that now. If Apple bounces in a wave 4, SPX should retrace/retest its morning high before collapsing when Apple finishes one or two 5th waves down. That would fit perfectly with our scenario for a 3-6 day SPX bounce from 1356ish or possibly 1340ish starting Tuesday. Not sure about the count but sell the rallies. Good luck.
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- SPX is below its 5/10/20/50dSMA with a 7% gap down to the 200dSMA.
- The 5/10/20dSMA are all trending down with the 50dSMA beginning to flatten.
- The 3-day candle support at 1391 was broken forming a daily downtrend with daily resistance now at 1401.60 just above a large gap down.
- Hourly candle support was broken at 1383/1385.
- The uptrend line from 1075 has been pierced.
- All of those indicators are in slightly worse shape for the Dow and its early March low has been broken with the October high not far below.
With my jaded eye conjuring up ways for Mr. Market to suck the most money out of people's wallets in line with technical indicators, I could see the following count happening:
1422-->1357=A
1357-->1388=B
1388-->1370 (or a little lower)=1st abc wave of EDT C
1370+/--->1379+ to run stops-->1360s-->1370+ to overlap-->1350s to form marginal new low with posd=completion of EDT C
1350s-->1380s around OPEX since max SPY option pain is estimated to be 1383-1393 and the week would end positive.
Overall, I still think there are a lot of dip-buyers and believers in the economic turnaround, so SPX is unlikely to go down without a fight. But, SPX has had a long strong run, Fed monetary support is waning, signs of economic trouble are creeping in and the short-term technical indicators are bearish. Also, my cycle work was expecting a low around last Thursday +/- (bookend lows 2-3 days on either side of that day in the 1350s would be perfect) and is expecting another low on May 3ish. The projected low I mentioned for May 18ish is questionable because the weakness of the recent SPX rallies in RSI was not quite enough to trigger another official cycle. June 4ish is now the next official projected low, but my discretionary spending lag indicator calls for potentially significant tops on April 12ish (1422 on April 2nd is close) and June 1ish. So, the June 4ish low could be a 1-week sharp drop or just a weak final wave 4 low in the final SPX rally into early June. To me, all that stuff equals a choppy downtrend for at least 2 more weeks with a likely strong May uptrend culminating in another important top in late May or early-to-mid June.
Intriguingly, in terms of Elliott Wave counts, Tony's OEW expectation is for a wave 4 down to the 1313-1327 area followed by a new 5of3 high to possibly 1500ish. That matches well with my technical work in terms of timing and direction but I'm not so sure about the price high. In a recent post, I argued that Dow technicals may actually be the leading factor. If SPX breaks below 1320, it will likely stay above its critical 1293 support, but there is a good chance that Dow will will break its Oct/Nov 2011 highs causing wave overlap not allowed in EW except for EDTs. I like that scenario if for no other reason than I tend to believe Mr. Market likes to screw and confuse the most people and creating different SPX/Dow setups would do it. So, if SPX breaks below 1320, the next high is much likelier to be a lower high OR merely a slightly higher high (maybe 1440-1450) with Dow forming an EDT. Likewise, if SPX holds above 1320 with Dow not overlapping its 2011 highs, the possibilities for a much stronger rally go up and Tony's count calling for an ultimate high near 1576 in late 2012 or early 2013 would look pretty good. The various technicals I see favoring an intermediate-term bottom very soon on gold and miners are indicative of another inflationary surge coming our way.
If you are still reading this, you are a trooper and you can tell that the SPX1320ish/Dow12284 level will be an important factor in my forecast for the remainder of the year. The FOMC meeting on April 24-25 is likely to cause a volatile multi-day inflection point. I think there are a lot of people still holding out hope that the Fed will at least talk about further easing at a minimum, but recent inflation figures and continued debt worries have them in a bit of a bind. My suspicion is that the market will feign disappointment in the Fed meeting causing the final low into April30-May4 but the Fed will leave the door open enough to QE3 and economic stats will be not be bad enough to make people worry about recession but will be bad enough to favor more Fed action, so there could be a lot of optimism heading into the June 19-20 Fed meeting. I don't think anybody will expect major Fed action on Jul 31 or in Sep/Oct as the elections heat up, so the June meeting is the one that could serve up real fireworks. The 1st half of June could prove to be the final bull market top (whether its a higher high or lower high) if the Fed disappoints as I expect or it could be just a bump in the road to test SPX 1576 if the Fed acts strongly especially if it is in coordination with the EU.
Essentially, until June/Jul as I've stated before, I tend to think SPX will largely stay in a 6-8 month 100-pt (7-8%) range at 1320-1420 with possible piercings for a few days. That would frustrate a lot of people and setup SPX for either a huge multi-month rally to complete the bull market in late 2012 or early 2013 or a huge confirmation of a new bear market with a possible brief reprieve around the election followed by a disappointing Christmas spending season as real estate, foreclosures, bankruptcies, margins, global growth and financials all take a turn for the worse. I expect the latter even though I'm not sure whether the June high will be lower or higher than 1422, and I'm open-minded to a multi-month breakout to SPX 1576 depending on what happens at SPX 1320ish in the next couple weeks and at the FOMC meeting in June. Good luck.
Thanks
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