Sat 6/22/2013. Weekend Update.

Current SPX Position: Short at 1646.69
Next Action: Stop and go long at 1599.20
System Score: 5=Neutral=Trend Score + Turn Score=3+2
Proposed New Score: 46%=Neutral=Trend Score + Turn Score=12+34

The System gameplan for Monday....
If SPX rallies above 1599, stop out and go long with stop at 4hr support.
If SPX does not rally above 1599 or close an hour below 1580, maintain short position and stop/reversal level and the Score is likely to get slightly more bullish.
If SPX closes an hour below 1580, lower the stop-n-go-long level to 1598 and lower with 4hr resistance

It is not clear to me whether Friday's action was a sideways wave 4 or the beginning of a corrective rally. A weak wave 4 often only retraces 20-30% of wave 3. A 23.6% Fib retracement of 1652-->1578 would end at 1595-1596 and a 23.6% Fib retracement of 1652-->1584 (the 2nd interpretation of wave 3's bottom) would end at 1600. So, we have a potential weak wave 4 target at 1595-1600 where we also have some major pivots and price-volume. It just so happens that SPX rallied to 1595 and 1598 Friday afternoon in an ABC meaning wave 4 could be done. Interestingly, wave 2 at 1547-->1552 into the Fed announcement took 4 hours, and the rally at 1578-->1598 also took 4 hours. So, considering time and the shallow Fib retracement, it is possible that SPX will make a wave 5 down on Monday to complete "a of C". Tony Caldaro actually counts 7 waves down for 1654-->1578, which is different, but nonetheless would cause another downleg to total 9 waves and thus be an impulsive "a of C". It would seem another wave down would make the EW viewpoints a little more clear, and System technicals would certainly allow for that move.

If SPX were to make another leg down and if we labeled 1654-->1647=7pts as wave 1 and 1652-->1584/1578=68-74pts as wave 3, then we could make some projections. Obviously, w5=w1 or w5=w1*2.6 would not even make a new low and w5=w3 or w5=w3+w1 would take SPX down to 1522-1530. The latter seems plausible but not likely...yet. However, there are other possibilities. We can notice that before wave 3 really took off to the downside, SPX had traveled 1654-->1633=21pts for all of its nested wave 1s combined and the potential nested wave 5s since then have been 1608-->1584=24pts and 1598-->1578=21pts. So, another leg down could be 21-24pts long. That would lead to a projection of 1574-1577 which is pretty much a double bottom with likely positive divergence. Tony Caldaro has an OEW pivot at 1576 too. That area will be our favored target IF SPX needs another downleg. And, I'd be very surprised if SPX did not at least bounce to some degree from that level. If however SPX ultimately breaks below 1570, then the targets around 1530 seem much more than plausible.

For a few weeks, I've been pointing to event clusters around June 19-21, June 28-Jul5 and now mid-to-late July for a potential minor discretionary spending-induced top. Given how many longs are probably trapped now after the first buy-the-dip that hasn't worked in long long time and given the condition of the System technicals and given at least  a 3-6% top in the 2nd half of July, it seems most likely that there will be another low in the June 28-Jul5 time frame, not a high. If SPX rallies Monday, I expect it to get stopped at 1600-1625 before falling to 1530-1550 Jun28-Jul5. If SPX double bottoms in the 1570s Monday, I still expect SPX to get stopped at 1600-1625 after a 2-4 day rally and then fall to 1530-1550 Jun28-Jul5. If SPX falls all the way to 1530-1550 this week, I'd expect the next "b of C" rally to end around 1600 or below after 2-4 days before double bottoming at 1530-1550 Jun28-Jul5. Assuming a top in the 2nd half of July, it's tough to say whether that would be the end of a wave A, 1 or ABC, but I'd expect some violent rallies. The next FOMC announcement is not until July 31st, and it still seems like people believe the Fed is not really going to start tapering this year as they've said, but most people also think the Fed fully controls its own actions and is not driven by fundamental realities. So, market expectations for Fed stimulus are still high in my opinion making July 31 another potentially pivotal date and we'll see what SPX technicals are saying when that date approaches. Good fortune.