Thu 12/27/2012. Daily Update.

(Update Thu 12/27/2012 3PM EST)

Current SPX Position: None
Next Action: Go long at 1419.75 or Go short at 1401.79
System Score: 7=Bullish=Trend Score + Turn Score=3+4

It looks like the House is reconvening on Sunday, and the market is bouncing. My pure guess is that it is a CYA move and not an indication of a deal. That doesn't mean Congress can't feign "progress" into Monday to prop up the markets temporarily. Regardless, we follow technicals, and SPX has now tested 1400ish which is about as low as I think it could go without confirming a more serious downtrend. I suspect a retest of today's low with a bounce into the weekend of hope, but you know what suspicions are worth. Good luck.
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Current SPX Position: None
Next Action: Go long at 1423.98
System Score: 5=Neutral=Trend Score + Turn Score=1+4

I expected the Trend Score to drop if 1415-1420 was breached, but, with SPX below 1410, it has plummeted to 1. With the Turn Score rising due to oversold indicators, the total Score remains neutral below SPX 1410 and slightly bullish at 1410+ and further bullish at 1415-1420+, so the go-long level at 1424 makes sense and could drop to an even better 1420-1423 if SPX makes lower hourly closing lows today. Based on my technical analysis and projections, 1410-1420 will remain the key battleground for at least 2-4 more days, so any resistance break at or above that area will likely be bought by the System and vice versa. Obviously, a short trade setup would likely require SPX to fall further before forming a failed rally over several hours or more to 1410-1420ish. Until then, the odds favor a long trade setup although I'm afraid we could wake up any morning +/-2% or even 3% with fiscal cliff news making any trade riskier than normal.

SPX has reached the 1408ish target area. I explained how 1410-1420 is a critical area in terms of the System. However, it is also an important area in EW terms. Since today's drop is likely either 3of5, 3ofC/Y or the start of 3of3of3, it is important what happens on the next SPX low. If SPX can't get back above the previous pivot low at 1416, it is susceptible to further damage. And, if SPX falls below 1398/1400, it will start to look a lot more like the 3of3 scenario is in play. So, what happens next is probably critical to determining the larger trend. Good luck.