Mon 6/18/12. Bullish for now.

(Update Wed 6/20/12 12:40PM EST)
The Fed essentially met the consensus expectation. Bigger bazookas are reserved for a crisis and/or central bank coordination. The initial SPX reaction drop looks like a wave 4 from last week's 1307 bottom, so there is a decent chance for SPX to rally to 1365-1375 before it decides whether the rally from 1267 is an ABC or 123. The former would lead to a drop to the area of OPEX max pain at 1340ish on June 28-29 or possibly something worse while the latter would lead to another OPEX runaway likely reaching 1400 next week after chopping around 1350-1370 this week. The key will likely be whether the 50dSMA becomes support or resistance and how high the next rally reaches. Of course, you know my cycle, spending and System analysis has me leaning towards SPX holdings its ground (1330-1370), making a new high (1363+) and possibly reaching 1400-1440s by July 4th +/- before collapsing, and I'll have a better feel by Thu/Fri. Good luck.
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I'm bullish on life and bearish on the economy. From a technical stock market perspective, I'm bullish for the next 2-3 weeks with a big caveat being the Wednesday Fed wildcard.

I mentioned a couple times that I was dealing with some personal issues that would slow down my blogging considerably but I understated things and then experienced a death in the family to top it all off last week. Times like this always put things in perspective. Time is precious. Take nothing for granted. My time will continue to be limited into early July but I should have more pockets of time for stock market analysis.

First, let me acknowledge that I was wrong to expect a horrible June. However, I'm trying to learn and make profit like everybody else here, so it's worthwhile to look at what is working and what is not working.

1. My cycle work called for lows May 4, May 18 and June 4 +/-. Those correspond about as perfectly as you'll see for the wave 1, 3 and 5 low from SPX 1415 on May 1st. Let's just say this has been working well at least 2 out of 3 times. My next cycle lows are projected for July 13 +/- and then July 30 +/-. It would have been July 4th as previously posted but SPX continued falling and so the cycle pushed out.
2. OPEX max pain. Option expiration max pain was nearly a bullseye for April and again in June in the 1330s. May proved to be a runaway from max pain which seems to happen about once every 3 months, and sub-1340 was the trigger. I thought 1340ish would hold but I did mention its importance. OPEX rarely just sits 2-4% from max pain instead choosing to seek max pain like a magnet or push away from it as 2 magnets do when the like poles are brought together. I'd say this has been working pretty well at least 2 out of 3 times for the years I've followed it. Current max pain for June 29 is 1340ish and July 21st is 1330ish.
3. Discretionary consumer spending lag. The April 9 +/- top projection turned out well but there was an alternate June 1st and I thought SPX might retest 1422 around then. Wrong. April 2nd was the top for that spending cycle. I don't think I analyzed it before but the November spending low as seen in my favorite links led to a projection for an SPX low on Dec 1st + 27weeks=the week of June 4th +/-. So, that low is important. However, the March 2012 spending high (nearly surpassed in May but not quite) leads to a projection for an SPX high on April 1st + 15-16 weeks in a bear market OR 20-23 weeks in a bull market. Since I am very bearish on the economy and since the last hoorah in Aug/Sep 2007 was the result of a 15-week spending top lag, I am heavily leaning towards the projected top being April 1st + 15wks= the week of July 9 +/-. Since 2007, this indicator has been working extremely well for spotting bottoms and great for spotting tops but only if you used the bull market projections since 2009. Is the 3rd time a charm for me to suspect the bear market projection of early-to-mid July? I think it will be based on the odds and the same 2007 setup. Also, the spending chart since 2011 looks like a 1-year EDT wedge has formed probably ending in the first week of June. That spells big trouble with spending if it behaves as the pattern projects.
4. USD. The US Dollar has pressed higher in what I identified as a likely series of 1-2 waves since May 2011, but I expected a bit more consolidation in May which never happened thus hurting SPX faster than June. If USD is about to shoot higher in the heart of a wave 3, you can likely expect it to rise from 82 to 92+ within 3-4 months with brief rests at 88-89, 92 and 94. Such a move has been seen a few times in the last few years and SPX would suffer greatly. The key moving averages are aligned upward. Unfortunately, this has been difficult to predict short-term and SPX does not always diverge from the dollar, so it's usefulness is more for the big picture, and from May 2011, a 3rd wave up looks probable while from April 2008, the heart of a wave 3/C up looks likely. Either way, that indicates the US will be a safehaven with relative strength over Europe and other places in the months to come.
5. My System. If you had shorted SPX from 1415 or even 1380 after key moving averages were broken, the 4-candle rule would have kept you in the trade until the bounce from 1292 which was 5-7 days as I projected but not 1340+ as I projected. Tough to get time and price right. Then, it would have gotten you short again from 1314 with exit at 1282 after the rally from 1267. From there with TRIN>2 and VIX at its uBB20 on the June 4th cycle low, the System would have gotten long at 1282 and stayed long until now. Real-time is admittedly a little more difficult and it can get chopped up in consolidations like many systems but it's hard to argue against it working well in strong trends. Currently, the 10, 20 and 200dSMA have turned up with SPX above them. SPX is narrowly below its 50dSMA which is fairly flat. So, my System is long and leaning bullish with caution at the 50dSMA and a stop at 1334. If SPX breaks the 50dSMA and closes above it, the odds increase greatly for further rally. Although there is considerable resistance in the 1360s and above, SPX could churn higher on such a breakout for 2-3 more weeks and maybe even retest 1400+.
6. T-Theory by Terry Laundry. I find it hard to use on a short-term basis but he was right to turn bearish in April/May and he expected a bounce into late June or the first couple days of July.

Overall, I think one could reasonably argue for another 2-3 weeks of SPX rally and USD consolidation/drop before a real SPX implosion occurs when USD surges higher in a wave 3, VIX surges higher to complete a wedge and consumer spending drops off a cliff to signal the end of a 1-year wedge. Putting more precise time and price on that is difficult, but consumer spending suggests the first 3 weeks of July are ripe for a top, Terry Laundry suggests July 1 +/- is ripe for a top and my cycle work calls for lows on July 13 and July 30 +/-. Also, quarterly fund inflows may suffer as a result of recent bad volatility and economic reports, so any SPX rally in the first week of July around the holiday should prove to be a fake-out. Although the odds seem low, I would not rule out the possibility of SPX rallying 8% higher to reach the 1440s to complete a huge EDT from SPX 1011 in 2010 which would also complete a huge ABC/WXY from March 2009 and complement the wedges forming in VIX and consumer spending.Unlike the recent 2-month drop to SPX 1267, an EDT completion should lead to a much faster 2-5 week 10%+ drop similar to 3 or 4 other times since 2009.

Having said all that, the wildcard is the Wednesday Fed meeting. Fed disappointment could make the dollar stronger and SPX weaker much faster than planned. Yet, it's hard to imagine SPX falling apart if the Fed implements QE4. So, maybe the Fed will implement a small extension to Operation Twist or some other watered-down QE which might satisfy the market temporarily until they realize a bigger bazooka was needed to prevent the European implosion. It's even possible the market could trigger short-covering so fast that 1400 or even 1440 become possible in 2 days or 2 weeks. I'll try post something later this week after the FOMC announcement to see if we can tie it into the technical setup.

Ultimately, there is no escaping the fact that there is NO long-term viable solution to the European and worldwide debt problems that does not involve massive pain AND the fact that Taxmageddon is an IMMENSE and real threat for January 2013 and unlikely to be solved before the November elections AND the fact that foreclosures have ramped up heavily this year meaning people will now be forced to spend money on rent rather than discretionary stuff which will be good for real estate eventually but  not everything else AND the fact that millions of people have been rolling off of 2+ years of unemployment compensation over the last few months which will obviously crimp spending and put pressure on wages AND the fact that banks and people are still in debt above their heads which prevents them from dealing well with any shocks to the system AND the fact that people are rebelling against bailouts, austerity and other solutions that avoid making the big dogs pay for their bad debts. So, you can see why I am pessimistic about the economy for the rest of this year and likely beyond. Good luck. Enjoy life.