Current SPX Position: No position
Next Action: Go long at 1716.70 (will fall to 1714.21 if SPX closes below 1704 at 11AM)
System Score: 7=Bullish=Trend Score + Turn Score=10-3
Proposed New Score: 60%=Bullish=Trend Score + Turn Score=48+12
The Score is narrowly bullish but that's all it takes to go long at the next 4hr resistance break. Having said that, there are many reasons for SPX to revisit the 1680s. The last downtrend gapped down from 1690 breaking an H&S neckline around 1685. The narrowest consolidation during the current uptrend occurred at 1680-1690 for 4 days. The previous uptrend to 1710 spent about 2 weeks near the 1680s. The uptrend before that topped at 1687. The 20dSMA and 50dSMA are nearing 1680. Also, here are the initial drops in the first week of multi-day downturns since QE infinity in November 2012...Dec12 1448-->1398=50pts, Feb13 1531-->1485=46pts, Apr13 1597-->1536=61pts, May13 1687-->1636=51pts, Aug13 1709-->1639=70pts. The latter took the longest (13 days) and fell the most (70pts) but the others only took 2-7 days. So, if we throw out the last occurrence, odds favor an approximate 1-week drop of 46-61pts. 1730-(46 to 61pts)=1669 to 1684. We are on day 3. Good fortune.
P.S. The uptrend from 1343 in November 2012 has 3 touch points...1343, 1560 and 1627. You can also draw a thick line connecting the recent tops at 1687, 1710 and 1730. We could argue about 3 waves versus 5 waves, but the shape is most definitely a diagonal triangle and that's what most traders look at. If we assume for a second that 1730 is a significant EDT top, the general rule is that SPX should fall back near the beginning of the EDT which could be argued as 1536 or 1343. An initial drop to 1680 +/- this week would fit the pattern for the last year or more. Then, a 50% +/- retracement to 1700-1710 Fri/Mon would make sense followed by a retest next week of the uptrend line from November 2012 which is currently near 1655. After that, maybe the uptrend resumes, maybe a 10-20% downtrend begins. Data thus far for September consumer discretionary spending suggests that SPX should expect a significant bottom around April 1st +/- but that does not preclude new highs in between.
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