Mon 8/20/2012. Daily Update.

Date-Time	Mon 8/20/12 2:15PM EST
Active SPX Trade	None
System Score (S2)	7 = Trend Score + Turn Score = 10 - 3 = bullish
Trade Trigger (T2)	Go long at SPX 1418.72 with stop 0.5% below today's low unless there is an hourly close below 1414.09 first in which case T2 will fall to 1416.99 and lower with 4-hour candle resistance and stop 0.5% below the new day low.
Commentary	Sorry about the run-on paragraph in my last post. It's fixed now. I actually used line breaks but I was in HTML edit mode and I forgot to add explicit line break tags. The overbought turn indicators have been neutralized to some degree so the bias is still bullish. 4-hour candle support was broken today which resets T2 for a new trade. The System will look for a long entry given the bullish S2. I forgot to mention there was a minor SOS day last Wednesday but the unprecedented cluster of SOS signals likely makes the result unprecedented too, and it has been as we've not seen a quick 50pt+ drop or a strong relief rally like other cases since March. In recent months, I've been talking about the potential for a huge EDT from SPX 1011 in 2010 completing the C wave of an ABC from March 2009. I'm now seeing that pattern charted in several blogs over the last couple weeks which worries me. However, given my beliefs about the economy, cycles, discretionary spending lag etc, I think the pattern will likely work with a surprise or two to knock people off the ride. One surprise might be a continued grind higher for 2-3 weeks without a true blowoff top and another surprise might be an even swifter drop than anybody can imagine. EDTs are typically retraced (nearly) completely in much less time than it took to create them. So, a 2-year EDT could easily be retraced in 6 months targeting the first half of 2013. The resistance areas near 1422, the 1440-1450 area and 1500 are the likely topping levels. 1250-1300 are the likely bottoming levels into October. Having said all that, what appears to be an LDT or EDT can turn out to be a series of 1-2s which break higher as Tony Caldaro suggests, so the EDT pattern becomes more questionable if SPX exceeds 1500 and/or cannot break back below recent support at 1400. Regardless of my prognostications, the System is my guide and it is solidly bullish for the time being. Good luck.