Current SPX Position: Long at 1503
Next Action: Stop at 1495
System Score: 10+=Bullish=Trend Score + Turn Score=10+4
The System is now long from 1503 at the open. Although I trade SPY, leveraged S&P ETFs and ES options, the equivalent SPX opening minute traded at 1503 and SPX has hung around 1504-1505 for the first 20 minutes. Let's hope the whipsaw is over and we'll finally get a 2%+ trend. Good luck.
P.S. It appears that IF the 1520s are reached in the next few days, the daily RSI5 and RSI14 will have bad negd along with MACD after already seeing negd on February 1st. I recently pointed out that depending on the timeframe (daily, weekly, monthly) and indicator (RSI5/RSI14/MACD) SPX has shown strong negd over the last 6 months, 12 months, 2-3 years, 6 years, 9 years and even 18 years. That tells you the bull market is likely running on fumes from an intermediate-to-long term perspective. And, each instance of negd did lead to significant 10-20% and 40-60% downtrends along the way with no real progress since SPX 1500-1550 was reached in early 2000. Now, we have shorter-term daily negd and very strong hourly negd with the early January surge and even going back to September. People are talking about the beginning of a new surge and VIX is at 6-year lows. Perhaps the sentiment is not quite euphoric enough and SPX still rallied in 2007 as VIX started its climb. However, severe caution is advisable.
IMHO, a particularly dangerous moment will occur if Dow makes a new all-time high at 14198+ or a new daily closing high at 14015 while SPX does not. Nasdaq is actually closer to its bull market high but, of course, still well below its all-time high in year 2000. Dow has only closed above 14000 twice according to my quick look, and both times Dow pulled back 10%+ within weeks. A new Dow high would likely equate to SPX 1525-1540 which is still well short of 1576 creating a highly-watched negative divergence. I know patterns and EW morph and are not fool-proof, but there is still the possibility of a 1.5yr or 3yr EDT ending imminently or expanding with one more down-up into March/April.
In addition, a lot of root economic problems have been swept under the rug and explained away. I live in the real world with aging parents, dying grandparents and concerned teens. College costs are outrageous with a bubble likely to be pricked and almost no more upside, my income (nothing to sneeze at) is 20%+ lower than it was from 1998-2008 as with many others, health care costs continue to skyrocket, real estate and stocks never came close to reaching their typical bubble-cleansing lows and spenders are turning to saving and balanced budgets instead of debt. All of this coincides with immense deficit, debt and credit problems around the world on a government and personal level normally seen at the cusp of defaults and bankruptcies and we've likely seen the peak productivity and margin impact from outsourcing labor and materials, computer automation, corporate house cleaning and financial games at all levels. And, I didn't even discuss technical, demographic, technology, spending and other cycles that I've written extensively about in the past. Nor did I discuss some of the fiscal cliff, debt ceiling and European items still to be addressed in the next 1-2 months. Things are bad, but the Fed and government have done their best to put lipstick on the pig.
In summary, the stock market is at great risk for a great fall in the coming weeks and months. Essentially, it's becoming harder and harder for me to see the bull market lasting beyond March/April. For 13 years, the year's largest rally or pullback has ended in March/April. Since I do not expect SPX to rally through 2013 nor 2014, I think the most likely scenario is for late March or April to mark the end of 2013's largest rally. To make that happen, I see 2 possibilities. (1) SPX falls 10-15% beginning imminently maybe as soon as we have Dow/SPX divergence and then rebounds 8-12% into late March or April completing the largest rally we'll see in 2013 and backtesting the EDT breakdown with a typical 60-80% wave 2 retracement. (2) SPX falls 50-100pts (3-6%) beginning imminently followed by a rally near new bull market highs but possibly leaving a Dow/SPX negative divergence in late March or April. The latter possibility would probably allow SPX to retest the 1500s into May/Jun/Jul before falling apart into the fall while the former possibility would mean a much quicker test of 1000-1100 which is what I expect at a bare minimum in 2013/2014. Yes, I'm looking ahead which is not what the System is about, but it's hard to ignore the signs and best to be mentally prepared for the likeliest outcomes. Good luck.
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