Current SPX Position: None
Next Action: Go long at 1617.11
System Score: 8.5=Bullish=Trend Score + Turn Score=4+4.5
Proposed New Score: 62%=Bullish=Trend Score + Turn Score=16+46
Both Scores are slightly more bullish than this morning. Even if the 50dSMA is broken tomorrow morning, I expect the Score will remain about where it is or possibly slightly more bullish. Today was a fairly sizable BOW day, so SPX is unlikely to trade much more than 20pts lower in the next few days. And, VIX is getting a little extended and very near the resistance it encountered in mid-April and late February. That's two more pieces of evidence supporting 1600ish as support with a probable piercing of the 1590s. However, my crude EW count calls for one more large bounce (10-20pts) and yet another low or retest, so any bounce will probably not gain immediate traction with people getting their largest market scare in over 6 months. It would be ideal to see a Thursday gap down (perhaps on ECB or Japan disappointment) to 1595-1605 followed by a rally back to 1610-1615 and then maybe one more brief dip to the 1590s just before or after the Friday jobs report before a 1+ week rally/consolidation. Anything much more bearish than that scenario would be highly concerning to bulls, because the whole structure down would start to look more like a series of nested wave 1-2s followed by a wave 3 down with much lower initial projections just to complete a larger A/1 wave.
SPX would need to make an hourly closing low below 1608.90 at 11AM or beyond on Thursday in order to lower 4hr resistance below its current level of 1617.11 to 1614.96. So, if my ideal scenario continues to play out as it has for a few days now, it's probable that SPX will make a new low at 1595-1605 at 9:30-10:30AM and then make a corrective rally at or below 1615-1617 into late Thursday to be followed by a near double bottom just before or probably after the Friday jobs report. That would be a volatile 2 days much like last week prior to the last 2 days of fairly steady downtrending. I heard an options expert say that most of the put buying in recent days has been hedging in front of the jobs report (who knows if that's true but it makes logical sense especially with large gains to protect for 2013 and weakening economic data and Fed speak), and it means they will likely take the protection off in the hours or days after the jobs report whether it is after a gap down or maybe an up gap and crap. Either way, the BOW number today, potential large short covering after the jobs report, heavy 1600ish support, upcoming Fed/OPEX days, bullish System Score and best opportunity in 6 months for buy-the-dippers makes Fri/Mon a potentially explosive 2-3% rally opportunity. Of course, Mr. Market probably wouldn't make it that easy for buy-the-dippers, so even if it plans on making new highs again, I suspect the whole move down to 1600ish will prove to merely be an A or W or 1-2-1 wave with 1530-1550 possibly coming into play (as predicted by discretionary spending and several other factors) before the market makes its typical 70%+ retracement of the initial bear market downleg assuming the bull market is even over. Good fortune.
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