Current SPX Position: Short at 1630 (last long trade closed 1617-->1630)
Next Action: Stop at 1645
System Score: 2=Bearish=Trend Score + Turn Score=4-2
Proposed New Score: 32%=Bullish=Trend Score + Turn Score=16+16
The Score is finally bearish for the first time in a long time, although it had gone neutral a few times in the preceding months. The System is now short albeit on a gap down below our intended entry level which I never like. The Mon-Wed bearish setup is playing out as expected, but bears need to inflict more damage before technicals have a chance to turn bullish likely Thu/Fri. The following price and time projections follow my assumption for the time being that 1649 was a B wave high on Monday (yes, a wave 2 is possible and so is a continued B wave higher, but that's not what I am conservatively estimating based on the bearish technical setup).
Price: If SPX retests 1600, it will be breaking the 50dSMA and the uptrend line from November at the same time, and, without short-covering and convicted buy-the-dippers that showed up around the unemployment report, it's likely that a technical breakdown and buying weakness will combine to produce a swift drop. Also, the technical setup as tracked by the System Score is much more bearish now. Sure, a short headfake back to 1610-1625 is possible, but don't count on it. And, that swift drop does not have strong support until 1530-1550, although there are minor pivots/Fibs around 1575 and a previous upper channel line around 1560 which could end the downtrend but are more likely to cause small oversold bounces. If 1687-->1598=A and C=A, then C=1649-89=1560. I am more inclined to think SPX will make its last 2 headfakes above and below 1600 to confuse us...something like 1649-->1610-->1625-->1590-->1600-->1530-1560. Also, the charts look questionable, but max option pain is supposedly in the 1540s into the end of June.
Time: 1687-->1598 took 10 days, 1598-->1649 took 2 days (so far?) and 1649-->1530-1560 should be quicker using history as a guide on key technical breakdowns. Let's estimate 5-10 days. That would target Friday 5/14 to Monday 5/24. I've been suggesting June 19-21 as a turning point for a few weeks and that would fit perfectly. Also, many recent downtrends have lasted about 4 weeks and that would target June 19 +/-. Hmmm. Convergence. However, most downtrends actually make a momentum bottom a few days before their price bottom. So, there is a strong possibility that SPX will drop hard into Fri/Mon (maybe 1560-1575) and then bounce/consolidate into the Fed meeting before making a price bottom on FOMC/OPEX day. Then, the 1st week of July will likely be the next inflection point...either a double bottom or 2+ week rally top. Of course, price could hold up into FOMC/OPEX and then collapse, but that would likely require the market to avoid a 1600 breakdown over the next 6-8 trading days which will be tough if 1649 was truly the B wave high.
A lot depends on what happens Wed/Thu of this week. If SPX rallies above 1649 or holds up above 1620 for the next 2 days, then a Fri/Mon bottom at 1560-1575 would become very unlikely and it would be more likely for FOMC/OPEX to become the catalyst for a breakdown below 1600 into the 1st week of July. The technical setup is there for bears to seize, but they need to get below 1610 while bulls need 1650. Let's see what happens. Good fortune.
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