Fri 6/22/12. A few more up days?

(Update Thu 6/28/12 11:50AM EST)
SPX 1309 is probably the line in the sand. Although SPX did manage to rally to the mid-1330s near OPEX June 29th, it continually completes patterns on the low side of price and the early side of time. Given the EU meetings today and tomorrow followed by the start of a new quarter with a low-volume July 4th holiday week and a lot of corrective-looking waves around the 20dSMA and 89hEMA/SMA along with various price supports I mentioned into the first week of July, it is still possible that SPX could spurt 3% higher to 1363+, but the ceiling keeps squeezing in and another down leg below 1267 seems more and more likely in July. For now, a drop below 1309 would likely bring all the technicals in bearish alignment. Good luck.

(Update Tues 6/26/12 1:50PM EST)
It looked like SPX chose Option #2 below which was the completion of a 5th wave down from 1363 ending at 1300-1320 in price-volume congestion. However, today, Dow made another lower low and SPX nearly did. So, it is now possible that SPX/Dow completed a double ZZ down (7 waves) from 1363 which opens the door for Option #1 again (a 1363+ double ZZ rally) but finishing from 1309 instead of 1324. Yesterday, TRIN>2.3 for the 2nd time in 3 trading days. That can happen in cascading situations but given my analysis below, I still lean towards a decent bounce into end of month and possibly the first week of July. It remains to be seen whether that bounce (if I'm right) is a nested wave 2 to the OPEX max pain near the 1340s or if it can exceed 1363 in a double ZZ up from 1267. Given high TRIN and several rejections at 1360-1366 in the last 3 weeks, any bust through 1363 could easily surge to 1390+ unless rejected quickly or gapped below. A key moment for scenario is occurring right now and into tomorrow morning as SPX tests the underside of the 20dSMA and 89hEMA/SM. Although it's generally a losing proposition to trade on anticipated news or the reaction, it's not difficult to paint a Thursday/Friday news scenario for an SPX rally whereby the US Supreme Court rejects part/all of Obama's health care bill saving lots of business costs and jobs and more importantly removing some uncertainty AND/OR the European meetings exceed extremely low expectations. Good luck.
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Although I've been generally bearish since February 2007 and will likely remain so until SPX hits a major low in 2013-2014, I try to stay as unbiased as I can for short-term trading both directions. Admittedly, there is enough negative news out there to push SPX lower at any time, but my trusted indicators suggest SPX should rally or consolidate for a few more days and maybe even a couple weeks.
1. Cycles: My cycle work calls for lows on July 13 and 30 +/- and possibly Aug 10/13 if SPX retests 1363.
2. Spending: My consumer spending work calls for a high the week of July 9 +/- a week. If June spending remains at current levels which have dropped from May, it may also signal a short-term bottom in late July.
3. Other trusted technicians: Others I respect are calling for a cycle/breadth top the last week of June or first week of July.
4. Time: 1422-->1267 took 2 months. 1267-->1363 took 2 weeks. A longer rally time ratio is typical.
5. Sentiment: A majority of bloggers were calling for a high around 1360 +/-. Not common to hold true. Also, VIX looks like it is wedging on a short-term and multi-year basis and probably needs one more test of 15-16.
6. System Indicators: SPX remains above its 20dSMA and 200dSMA which are rising. The 50dSMA was not held, hourly support was broken at 1355 and 3-day candle support was broken at 1329. However, those events typically merely lead to a test of the 20dSMA when they occur above the 20dSMA and SPX came within 5 pts of doing so today. The 89hEMA/SMA served as resistance on the way down to 1267 and have now become support on the way up currently rising in the low 1330s. TRIN>2.3 and TRIN 5dSMA>1.6 usually lead to a large or full retracement within a couple days.
7. Price-volume support: Pull up a 60min chart and check out all the intraday highs and lows formed in the 1300-1335 range over the last 6 weeks with a particular concentration near 1330 which served as support today. That will be tough to crack without some big news or a little more time.
8. OPEX max pain: June 29 max pain is in the 1340s. A runaway from that zone is possible but I won't be surprised to see SPX land on 1335-1355 on June 28-29.
9. Window dressing: Although the last couple weeks of a quarter can end horribly as they did in September 2011 and June 2010, the 2011 example had already retraced 80%+ before falling and the 2010 example was just finishing a 2-month downtrend. And, both of those were 1+ year lows. In today's case, the downtrend already lasted 2 months and I'm not anticipating a 1-year low in a week. So, I expect some end of quarter window dressing and then the real tumble in Q3.

Given all those reasons, these are the 2 likeliest possibilities to me.
1. SPX finishes an ABCXABC rally into June 28/29 or even thru July 4th +/-. Specifically, a perfect match for my indicators would be a retest of 1360-1370 on Tues-Thu followed by OPEX max pain in the 1340s on June 29 and then the final C-wave up to 1370-1390 in the first few days of July. But, a runaway OPEX move up to 1390-1400 is slightly possible into June 29 if there is a bailout or similar.
2. SPX finishes a wave 5 down from 1363 on Mon/Tues to 1300-1320 and bounces in ABC fashion to OPEX max pain near 1340 on June 29 forming another nested wave 2 followed by the heart of wave 3/C down beginning the first few days of July.

The tone should be set by Monday lunch as to which way things are heading. Good luck.