Current SPX Position: Short at 1646.69
Next Action: Stop and go long at 1598.32
System Score: 8=Bullish=Trend Score + Turn Score=3+5
Proposed New Score: 62%=Bullish=Trend Score + Turn Score=12+50
The Score is now bullish. SPX 1574-1577 did not hold, and SPX 1530-1550 seems more likely than ever whether we visit that area now or next week. I'm not sure I ever mentioned it previously, but there was a channel I was following in late 2012 with the top being connected by 1422 in April 2012 and 1475 in September 2012. That line subsequently served as both resistance and support on the Nov-May rally around 1525-1535, and it crossed 1565ish today. It sure seems like that trend line is in play once again and has a lot of important touch points, so a run on the 1530s will likely occur once 1565ish fails on a weak bounce.
We cannot lower the stop to 1576 until SPX makes a lower hourly close at 1PM or later. Obviously, I'd love to lock in gains and not have such a loose stop at this point (currently 1598.32), but the System does recommend taking 25% profit in situations like this and it tells me that any SPX bounce is likely to fall short of 1598 or possibly pierce it slightly. If we assume SPX is wrapping up an impulsive wave AofC this morning with many bulls trapped above 1600, then a weak wave B could retrace 20-38% of A which would be 1654-->1560 (or lower?)=94pts*(20%-38%)=19to36pts=1573to1596. The main point is that any rally that reaches 15-20+pts has the potential to finish wave B and anything that approaches 1600 is likely to be sold. Max option pain for June 28th has supposedly moved up to nearly 1580, so it's possible any rally that starts today or tomorrow will test the 1580s by Friday and then retest/break the lows in the 1st week of July.
I suspect the jobs number on July 5th won't be impressive which would lead to speculation of Fed tapering delays, and the holiday plus oversold technicals, seasonality for a summer rebound and many downside targets fulfilled would set the market up for a very nice 2-3 week rally. Good fortune.
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