Wed 8/22/2012. Daily Update.

(Update Wed 8/22/12 4:15PM EST) FYI...If we see a gap down to test/break our stop (1406.81) tomorrow morning, please assume that I will lower the stop to around 1400 but I'll try to update you as quickly as possible if that becomes necessary. (Update Wed 8/22/12 2:55PM EST) The System went long at the 4-hour candle resistance break at 1413.10. Since S2 will likely go bearish if today's low is broken, the T2 stop will be placed at 1406.81. We might get whipsaw one more time before the next big move comes but that's the game. Good luck.
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Date-Time	Wed 8/22/12 11:35AM EST
Active SPX Trade	None
System Score (S2)	6 = Trend Score + Turn Score = 10 - 4 = bullish
Trade Trigger (T2)	Long at 1417.28. Will drop to 1414.64 if SPX closes an hour below 1409.44.
Trade History	0 for 2 totaling -1.6% for an average of -0.8% per trade.
Commentary	The technical setup has not really changed since my last post. The System allows some flexibility in setting stops when 4-hour s/r is broke but S2 remains in your favor. So, in the previous trade, I could have placed the stop 1415.13 or 0.5% below that or at minor pivots 1412, 1410 or 1407. Since none of those potential support levels were technically compelling, I decided to set the stop at the higher end of the range to minimize the loss. Even though SPX has not yet traded below 1407 and is not far below 1415, we are in a good position, because our re-entry point (T2) has fallen to 1417 (and possibly 1415 soon) which is only a few points from where we exited. That means if SPX decides to rally strongly now, the System will enjoy the ride (unless there is a huge gap up over 1415/1417) and if SPX breaks down, the System will not be caught long. That's good risk/reward management. My observation from backtesting is that this situation occurs a lot at the beginning and end of long rallies which equates to wave 2s and wave 4s in EW-speak. So, SPX is probably in some degree of wave 4 unless 1427 completed a large ABC in which case the System Score should reflect that for a short entry soon. I still believe the huge EDT from SPX 1011 is still a real possibility but that only tells us the rally could end anywhere between 1422 and 1500. Who knows if things will hold up into next week's Jackson Hole speech or even the mid-September FOMC meeting and EU events. Good luck.