Mon 2/25/2013. Daily Update.

Current SPX Position: None
Next Action: Go long at 1514.12
System Score: 10=Bullish=Trend Score + Turn Score=4+6

The System was stopped out for a 5pt gain (1506-->1511) on its long position. The bullish Score prevented us from going short. Despite the Trend Score now turning slightly bearish, the very oversold hourly indicators have created a very bullish Turn Score for an overall bullish Score of 10. 4hr resistance now stands way above at 1514 due to the rapid drop.

Although I've been saying to expect downside surprises and increased volatility into March, I did not expect today's pattern. I believe we have a 5-3-3 down from SPX 1531 and a 3 down for Dow since it set a new high. If SPX and Dow stay in unison on their intraday lows, SPX likely had a truncated 5th wave up to complete the entire 1yr EDT in unison with Dow's slight new bull market high just below its all-time high. However, if Dow makes a slightly lower low at some point on Tues/Wed while SPX makes a slightly higher low (which my gut tells me to expect), that will get the 2 indices back in sync because you could count SPX as w1 (1531-->1497) and w2 3-3-5 flat (1497-->1526-->1487?-->1516?) while Dow would complete a simpler wave 2 correction up. Of course, if SPX/Dow fall apart on Tues/Wed, there is likely something more serious afoot.

Given my bigger picture scenario of a large drop into early March followed by a rally into late March or April, it would be fitting to get a w2 up for a couple days followed by a 3-4-5 down into early March (maybe around the March 8th jobs report). If so, I'd expect SPX to hold up at 1475-1487 and not exceed 1515ish resistance. However, if SPX overlaps the previous top at 1474.51 on Tues/Wed before rallying much, then another wave expansion of the EDT becomes more probable up to 1531+.

My odds-on favorite scenario for SPX is...
w1of1=1531-->1497
w2of1=1497-->1526-->1475+-->1500-1520
w3of1=1420-1450
w4of1=1450-1475
w5of1=1400-1425 into March 8th +/- a day or so

w2 rally to 1475-1520 pinned at max pain around OPEX March 16th and likely not ending for another 1-3 weeks

w3 drop to 1270-1340

Yes, I'm probably getting ahead of myself as usual, but it's fun to prognosticate. Regardless, I'll follow the System and it tells me to expect an imminent rally and wait for oversold conditions to wear off likely around key 20dSMA resistance before getting short. Good luck.