Fri 8/24/2012. Daily Update.

The System is long again at 1405.14 which is lower than where it exited the previous failed long trade. The trailing stop is placed at 1395.61 which is a recent congestion pivot low just below 4-hour support at 1398. Turn technicals are oversold enough with trend technicals primarily bullish that it will likely take at least 2-3 days for a short setup to materialize. The first big wild card comes into play at the Aug 31 Jackson Hole speech and then there are various big news events and central bank dates in the first half of September. The uptrend is likely to end in that window of time.

In fact, my consumer discretionary spending lag analysis suggests a very significant top between Aug 10 and Sep 10 (20-23 weeks from the monthly spending peak on April 1st). Since the bull market began in March 2009, there have been 5 previous spending-induced tops which are labeled in my public weekly chart.
1. June 2009 - 23 week lag, 9% drop in 4 weeks
2. January 2010 - 20 week lag, 9% drop in 4 weeks
3. April 2010 - 21 week lag, 13% drop in 2 weeks, 17% drop in 10 weeks
4. November 2010 - 23 week lag, 5% drop in 2-4 weeks
5. May 2011 - 23 week lag, 8%+ drop in 6-7 weeks, 23% drop ultimately
6. Aug/Sep 2012 - ??????????????


An average spending-induced SPX drop would be 8-9% over 4 weeks +/-. I suspect the downtrend will last until the November elections +/- with a 2-3 week rally mixed in. If the SPX top turns out to be 1427, an 8-9% drop would target 1300-1315. That obviously makes a 1267-retest likely. On the other hand, if SPX continues to rally above 1427, it becomes more possible that 1340ish (a price-volume and pivot congestion area) could hold on the next large pullback. With pure conjecture, I tend to think SPX will pierce its upper wedge/EDT line around 1440-1450 in the next 1-2 weeks and then retest the 1340s where the market may bounce before deciding whether or not to test 1267 before the elections. And, then, after a brief relief rally, I think the wheels will fall off into early 2013 probably testing the SPX 1000-1075 level until the Fed/Congress takes panic measures again. Hopefully, the System will catch the bulk of that. Good luck.
_____________________
T2 has dropped to 1405.14 where the System will enter long. S2 = 10+ = bullish = Trend Score + Turn Score = 8 + 4