******See update at bottom*******
Current SPX Position: Long from 1462.98
Next Action: Stop at 1475.80
System Score: 9=Bullish=Trend Score + Turn Score=10-1
The 2+ weeks of consolidation at 1450-1470 allowed technical indicators to work off overbought status while not giving up ground on price. Now that SPX has broken out, there is still plenty of room for hourly indicators to rise before the Turn Score can counteract the Trend Score and force the System into a neutral state. So, for at least another 1-2 days, I expect the System to stay bullish even if 1470ish is retested. The stop has risen to 1476. My favored scenario is a further rally to the 1490s or 1500ish followed by a retest of 1470ish, and if the subsequent rally breaks much through 1500, the expanding wedge scenario from year 2000 with SPX reaching 1600 or so would look very possible into March. Good luck.
Update Sun 1/20/2013 11:30AM EST:
Although I have considerably reduced my news and blog reading over the last 6 months, I came across the following article this morning that shares some of my EW thoughts.
http://www.safehaven.com/article/28476/market-report-time-to-put-on-the-bear-suits
Tony Caldaro counts the entire overlapping bull market from 2009 as a series of nested 1-2 waves but has offered evidence to suggest the heart of wave 3 and the subsequent 4-5 waves probably won't be as robust as this article suggests. Still, I've been discussing the possible SPX wedge formation for months and the fact that an inevitable decision point will be reached as the triangle apex is approached. A decision point is potentially upon us right now with SPX making a new bull market high, although I agree that Dow (but maybe not Nasdaq) suggests one more small spurt is likely. Still, I can see the possibility for the EDT to nest higher whether in an EDT to end an EDT or something else. And, I can see an in-between viewpoint which considers the EDT an A wave with B and C to come in the first half of 2013. Either of those alternatives would support SPX 1550-1600+ while the wave 3 scenario would support even higher prices. So, all in all, as is normal with EW, there are various alternates and it's nice to have a System, but 3 of the plausible 4 EW scenarios I can come up with point to at least a sizable short-term pullback starting imminently.
I also tend to agree with the article that the diminishing returns on QE, the various economic drags and mostly bullish sentiment extremes not to mention cycles and discretionary spending stats which I follow point a lot more towards a top than the beginning of an explosion higher. Still, we just never know so we still need good trade management which the System helps with. It would probably be fitting and typical if SPX topped on the last round of decent economic and earnings news (relatively speaking anyway) in the coming days, rebounded on some Congressional can-kicking deal and then collapsed with the good news and trapped investors maxed out kicking off a 1+ year bear market. Whether or not this topping can reach 1500 or 1576 is an open question, but I tend to believe the writing is on the wall. Of course, that opinion has zero bearing on my System, but the System should benefit from strong trends. Good luck.
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