Next Action: Stop out at 1514.01 (will likely bump up to 1520+ on the next hourly close above 1523.61)
System Score: 6=Bullish=Trend Score + Turn Score=10-4
SSDDYA. SPX is forming a possible 4th wave triangle to be followed by 5ofC to complete the uptrend from 1343. A high in the 1520s or low 1530s would be tidy, and it is possible that a 5th wave could be a short-lived head fake at those levels. If the triangle w4 takes further shape with 1514 holding, we could be in for 1 more consolidation day Monday followed by a failed burst on Turnaround Tuesday. Just one possible scenario. Regardless, the System is still long until the technicals tell us otherwise.
Now to my favored intermediate-term scenarios. I've learned the hard way not to short potential tops when sentiment is bullish, negd abounds and the economy is struggling. There are other factors, and the System generally keeps us on the right side until the short-term turn indicators align. Still, we need to be ready when the turn does come. For various technical, fundamental and seasonal reasons, I've been expecting 1 of 2 scenarios.
1. a sharp drop to 1343-1398 at a minimum (8-12%+) in Feb/Mar followed by a 50-80% retracement in Mar/Apr followed by an even sharper drop to 1266-1343 at a minimum into summer.
2. a sizable drop to 1425-1475 (3-6%+) in Feb/Mar followed by a new high (maybe 1550-1600) in Mar/Apr followed by some rolling highs into summer and and then a collapse.
Well, I decided to revisit my weekly SPX-spending chart (see below) for the first time in a while. And, it favors the scenario of a new high after a brief sizable dip. Although 2of9 spending tops since 2007 have produced lower SPX highs, neither one of those looked the same as today's setup. The early 2011 spending setup is very similar to today while the early 2012 and mid-2007 setups were somewhat similar. All 3 of those led to 7-10% pullbacks followed by new highs months later although 2007 and 2011 barely made new highs and then collapsed 20%+ over the subsequent 6 months. Regardless of whether SPX falls back 5%, 8% or 12% and regardless of whether SPX bounces back to new highs or falls short, the evidence is piling up that SPX is about to imminently experience a large 50+pt pullback followed by a rally of nearly the same degree +/- before collapsing especially if spending does not recover NOW. And, given WalMart's report of the most disastrous start to February in their history along with the extra 2% payroll tax, higher gas prices and other austerity measures kicking in, I seriously doubt we'll see a large discretionary consumer spending recovery in the next few weeks. In addition, 2 of the last 4 spending tops/bottoms match the profile of the previous bear market rather than the current bull market. Good luck.
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