Current SPX Position: Long at 1655.13
Next Action: Stop at 1637 (can be lowered by rule as low as 1629 and may be if there is a large gap down...may place stop 2-3pts below any gap down)
System Score: 7=Bullish=Trend Score + Turn Score=3+4
Proposed New Score: 60%=Bullish=Trend Score + Turn Score=12+48
The late day 18pt rally from 1639 did react like an EDT concluded, but then it just as quickly reversed. Could wave 4/B/2 up already be over? Seems most likely to be a wave 4 if that is the case both in terms of time and price. So, the impulsive drop to end the day would be part or all of wave 5. Dow almost made a new low at end of day and both SPX and Dow have done so after hours. In fact, futures currently indicate SPX would open near 1634 which is nearly 9pts lower than the close. Obviously, a lot can change for better or worse overnight. If wave 5 equals wave 1 (1710-->1685), then SPX would fall to approximately 1632 (1657-25). That happens to align with an OEW 1628 pivot although Tony has provided numerous supports between 1621 and 1667 which have probably led to the choppiness.
The Fed minutes essentially confirmed tapering will occur sooner rather than later, but they were still unclear as to exactly when or how much. What little hope there may have been by a small percentage of market participants that tapering would not occur has probably been nearly extinguished now, but I think we'll get the typical wave 2/B behavior once this mini panic concludes. The real damage is done by interest rates which spiked after already rising rapidly by historical percentage measures in recent months. That's why I am particularly confident that a wave 3/C down will be coming in the near future. The piper must eventually be paid as he always has under the same rate spike circumstances. Some of you may recall that my discretionary spending analysis missed a call for another 8-10% top in late July (after the previous successful call for a late May top) by the closest margin since I started using it in 2007, but I wasn't sure if it would lead to a top or not. August 2nd is looking like a significant top now. I guess close calls are worth noting too. If discretionary spending drops off much in the coming months as Target, WalMart and other stats seem to suggest will happen, then my discretionary spending tool will actually trigger a call for a bottom. 20 weeks is the typical projection lead-time for a bottom plus it may take another 2-6 weeks to get the trigger confirmation (I use monthly figures), so if things play out bearishly, we are looking at 22-26 weeks minimum for a very significant bottom. That would be late January to February and possibly Mar/Apr which has been the most common seasonal turning point. Of course, keep in mind, that such bottom calls in a bull market help you sell out of new highs 1-2 months in advance of the bottom while such bottom calls in a bear market mean lower highs and lows pretty much all 20+ weeks. If a bear market has started, SPX is likely going a LOT lower by Jan-Apr 2014...maybe even 1000-1100. If the bull market is still alive, it just means the likely bull market high will fall between Dec 2013 and Feb 2014. Good fortune.
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