Sun 4/22/2012. SPX 1320ish.

(Update Thu 4/25/2012 3:55PM EST)
I lied about creating a new post. Sue me. But this is too quick a note. I might regret it but I am staying short against my own advice (well, literally by pennies). I willre-evaluate tonight and might take a small loss on the next pullback or ride it out...not sure yet but I think SPX is overbought at the potential conclusion of a dead cat bounce and I think SPX will at least backtest where it is now, so I don't see any reason to sell out just yet.

(Update Wed 4/25/2012 2:30PM EST)
I'll create a new post next time I add comments. Under the bearish scenario, SPX may be forming an EDT 5ofC from Monday's 1359 low in which case the next touch of 1391-1393 could lead to a collapse OR it may be finishing 1-2-1-2of5ofC in which case SPX will shoot up near 1400. I sure hope the latter does not occur just before the close because that would risk a bullish gap up above 1402 tomorrow and might cause me to reduce my position size. I am going 100% short at 1391-1393 playing the EDT double top pattern or on the next decent bounce. Wish me luck.

(Update Wed 4/25/2012 12:45PM EST)
No Fed surprise. So, I think the technical setup is still in place which is not to say the outcome is guaranteed. I am personally 70% short again from 1389. From Monday's low at 1359, we could have an ABC completed at 1391 but we might need the 5th wave of C to 1390-1393+. Today's high should either complete a WXY from 1357 or the first 3 legs of a triangle that will bounce around 1360-1390 for another 1-3 days. I will likely go 100% short on the next 5-10pt rally from any level. With the Fed out of the way and a double ZZ possible to 1393+ and a good short entry at 1389 and a potentially large reward to 1320ish, I will raise my stop to a max 1402. If I decide to exit before 1340 or 1402, I'll let you know as soon as possible. Good luck.

(Update Wed 4/25/2012 9:15AM EST)
Apple surprise. 1384ish would make C=A from Monday's 1359 low. If SPX is in the 3rd leg of a B-wave triangle, it could go as high as 1393. There is an OEW pivot at 1386 and Friday price pivot at 1387, so SPX may test that level. I think it's a good setup to short again, because the reward of 1300-1340 is much greater than the risk of 1393+.  There is a double ZZ setup which would allow 1393-1402 but I'd stop out at 1393 and reevaluate afterward, because SPX could possibly be in a bullish wave 3 up at that point. Good luck.

(Update Tues 4/24/2012 12PM EST)
SPX reached our target zone of 1375-1385. I suspect it has not reached the high for the day but who knows. Throw a dart to pick a corrective pattern. Apple's technicals suggest the fundamentals will be bad, but the persistent negativity could allow for a 1-2 day reprieve if Apple meets or beats the rapidly falling expectations. It's a toss-up to me. So, I'll just stick with my call for another SPX downleg starting in the next couple hours or days from 1375-1385 or possibly just above 1393 down to 1320ish around the projected May 3ish cycle low. With 2+ weeks of price-volume consolidation and many oversold indicators reset, it does seem more and more likely that a break of 1356ish would easily cascade to 1340 and probably the 1320s. Sell the rips. Good luck.

(Update Mon 4/23/2012 4PM EST)
SPX did not quite overlap 1370 but Dow did overlap Thursday's low. With that overlap in mind, SPX is highly unlikely to be in a wave 3 of 3/C. Either A=1422-->1357 and B=ongoing to 1375-1385 (or less likely 1393+) OR SPX is in a nested 2 of C/3. Both scenarios are likely to rally a little higher prior to Apple earnings and the FOMC announcement with 1375-1385 being the projected target zone. There are only 6 trading days prior to my May 3 +/- cycle low projection, so another 1-2 days of bouncing around would mean a likely final down leg to 1320ish lasting 3-6 days starting Tues/Wed. Good luck.
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(Update Mon 4/23/2012 9AM EST)
1% SPX gap down expected to the mid-1360s. Although the gap could run to 1356ish or lower, I see 2 other possibilities that would still allow for chop into the Apple earnings and FOMC announcement.
1. SPX could bounce from the 1360s finishing the B-leg of a 2-week triangle B-wave from 1357
2. SPX could form a couple more 1-2s below 1387
Those 2 options could almost look identical and both would allow today's gap to be filled or nearly filled. Although the triangle would allow for overlap along the way, SPX seems unlikely to break 1387 at this point. I'd be surprised if SPX does not break 1365.38 this morning. Good luck.
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I recommend reading Tony's OEW post this weekend. He offers his own evidence for 1320+/- being an important target as I did recently, and he also sees the possibility for one more SPX rally to complete a triple ZZ wedge at 1387-1398 or not. You have probably noticed that SPX has been weaker than Dow for the last couple days likely due to the Apple effect. Regardless of why, SPX is 6.6% above its Oct 2011 high while Dow is 6% above its Oct 2011 high. That gap has narrowed and could get even smaller, so one of my reasons for the importance of SPX 1320 has been greatly diminished, because SPX could reach 1300-1310 without Dow or SPX breaking their respective 2011 highs. But, there is still support at Fib 38%, C=A, a 100pt wave size and the previous 4th wave (2 degrees lower) at 1320ish.

I also see some SPX support at 1356ish but agree with Tony that the odds for that holding are extremely small. Dow has been leading and it already broke the equivalent of SPX 1340, so I expect SPX to follow. A lot of traders are watching that 1340 level, so there should be some support there but a break should trigger stops and easily allow SPX to reach the 1320s. That's where I expect real support to kick in for the reasons given above with a possible final scare to 1290-1320 where breakout support and an uptrend line reside.

I have a few related things to add.
1. The 1422-->1357 downtrend appears to be an ABC. I think it's a severe stretch to count it as 5 waves, and that has been a mistake to do for 3+ years. The subsequent bounce has also been corrective, so a double ZZ down to 1320ish appears likely. But, that also suggests 1422 is likely not the bull market top unless SPX has started a large LDT like it did to start the last bear market in October 2007. But, even that 2007 downtrend appeared to be more impulsive than what we're seeing thus far and it retraced about 80% of the top once finished. So, if SPX falls 4-6 days starting this week, bounces for a few days overlapping 1357 and then falls for another few days, we could get an LDT to 1300-1320 near May 3rd followed by a strong retracement to 1380-1410. If we don't see an LDT, SPX is likely to reach 1422+.
2. SPY barely pierced its 2002 low in 2009, and it narrowly missed its 2007 top earlier this month. SPY considers dividends and has better explained SPX tops and bottoms. If SPY were to pierce its 2007 top like it did the 2002 bottom, SPX could reach the next 1440s resistance. SPY has come close enough to allow a bull market top. However, the 3 obvious uptrends since 2009 on SPY's weekly chart all look like they have 5 waves except the current one from SPX 1075, so unless we have an extremely truncated ABCXABC (very unlikely), SPY should make one more high to complete an expanding triangle (unlikely) or 2 more highs to complete a double ZZ (likeliest). But, given that SPY has nearly reached its 2007 high already, the next SPY high or two may not allow SPX to test 1576.
3. Terry Laundry is calling for a bearish T with a typical scary drop into late June or early July. And, my cycle work calls for a low on May 3ish and June 4ish with a possible discretionary spending lag high around June 1st.
4. The 200dSMA is likely to stay flat for the next month based on SPX being in the 1300s 200 days ago. I expect the 200dSMA to rise from 1273 to 1280ish near the end of May and then rise more quickly in June even if SPX falls because it will be compared to the flash crash. If Terry is correctly expecting damage into late June, then maybe we'll get a flash crash repeat, but, assuming it's a little less dramatic, the 200dSMA should rise near the 2011 high of 1293 in June. So, it's not hard to imagine SPX piercing the 200dSMA and 2011 high and upcoming low of 1320ish in late June or early July. That would signal the likely end of the bull market to most, but Mr. Market could have one more trick up his sleeve to retest the high and complete an ABCXABC from March 2009 or at least retrace much of the initial drop.

So, if you combine my work with Tony's and Terry's, I can paint a logical scenario where SPX...
1) bottoms in the next 2 weeks +/- in the 1320s or maybe a little lower to 1290-1320 finishing either a double ZZ or LDT from 1422
2) bounces into late May possibly stopping in the 1380-1400 zone but likely just pausing there on the way to 1420-1450 completing ABCXA from 667 or maybe an expanding triangle
3) breaks the April/May low in June/July by piercing the 200dSMA and 2011 high at 1250-1290
4) retraces much of the previous drop

From there, it all depends on whether the bounces made lower highs or higher highs to set the pattern for late 2012. Higher highs could support a rally through the election and possibly into early 2012, whereas lower highs could lead to another major Q4 low. Regardless, as I've been saying a lot in recent weeks, I expect SPX to hang around 1320-1420 with brief piercings into June and possibly longer so I think there is lots of money to be made building reversal positions at the extremes of that range and then taking partial profits on each multi-percent move in your favor until the next extreme is approached.

For now, I expect SPX to hold up reasonably well into the Apple earnings and FOMC meeting on Wed possibly exceeding 1393 at which point it is likely to accelerate downward for a week or so. But, there is a bit of weekend risk with the French elections and with OPEX having passed, so let's see what happens Monday morning but the main thing is to keep the big picture above in mind and not to get too caught up in the intraday squiggles. If 1402 is surpassed this week, the scenario will probably change but the trend is down unless that happens. Good luck.