I am contemplating using a format like this going forward for all of my posts which I plan to do 2-3 times per week if not daily. Once I have the new S2 System rules published (hopefully by end of weekend), readers will have enough information to deduce the System's moves even between gaps in my posts. As I was finishing this post, SPX broke through yesterday's high, so there is now potential for a bullish swing trade at the close as described below. As the System Commentary alludes to, I have found through some back-testing that swing signals are followed by gaps in the same direction close to 50% of the time (obviously that means there are a lot of gaps against the new trend too) and such gaps in the direction of the new trend are (nearly) filled within a few hours or days about 90% of the time meaning it is generally smart to take quick profits on a positive swing gap and then reload later. The approximate 50/50 gap stats also explain why I think it is best for the System to open a 50% trade position at the swing close and a 100% position in the subsequent day or two at a potentially better price, so that friendly gaps lead to immediate profits and unfriendly gaps just lead to a better average price for the trade.
I am not sure if yesterday marked an intermediate-term low or if we need one more drop to SPX 1750ish. Dow needs to drop below 15370 to trigger the annual reversal statistics linked below. SPX did not decisively break the 1822-1851 range needed to trigger a bear market based on 16 years of Fib patterns linked below. Perhaps both those levels will be triggered with one more short-term market drop, and perhaps my desire to see a true VIX and TRIN spike at the intermediate-term low would coincide with that. Whether that occurs in the next 2 weeks or the next 2 months, hopefully the System will catch most of it. On a side note, if you believe stock buybacks have been a big contributor to the stock market in recent years and corporations have few other reasonable options for their cash, then you might also believe that January could continue to suffer as the peak buyback-blackout period continues and that late March into early May will also suffer. Ultimately, I am still expecting SPX 1750, 1600 and 1100s in CY2016 and possibly lower and/or longer.
By using this new post format, I plan to focus on my System and longer-term research which are my strengths and minimize my non-System short-term price and pattern projections which are my weaknesses and covered by countless blogs. Ideally, my personal commentary will typically be much shorter than this particular post. Please feel free to make comments or suggestions for improvement. Good fortune to you and your family.
Update 4:25PM EST: SPY/SPX confirmed a bullish swing. The hourly and daily score are barely overbought primarily due to the weak reversal. That means the System is 50% long at 1869 at the close. That position will be sold on any gap up beyond 0.4%. The System will go 100% long tomorrow at whatever point SPX is 1873 or lower including any gap down above 1848. I see several reasons for resistance at SPX 1900-1920, and I suspect the hourly/daily score will be a lot more overbought if that price region is achieved in which case the System would considerably lighten its long position.
*** S2 System Summary ***
Trading Position: Short from SPX 2020
Hourly Score: +30%
Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
System Rules (coming soon)
*** S2 System Commentary ***
If SPX rallies above 1881.33 today without falling below 1812 and without closing below 1865, the Daily Trend will swing Up. Due to lower weekly and monthly lows, the Weekly Trend and Monthly Trend will remain Down for a while. If the Daily Trend changes to Up, the System will go 50% long at the swing closing value to be sold on any opening gap up and then go 100% long at the next opportunity to buy within 0.2% of the swing closing value.
*** Other Research ***
Support for SPX 1600-1750 intermediate-term and SPX 500-1100 later in CY2016...
Big Picture Summary Including Cycles from USA Inception
S2EW Analysis - 1932&1974 ended wave 2s (year 2000 ended heart of wave 3, 2002/2007/2016 are all part of a wave 4 corresponding to the 1974 wave 2)
S2EW analysis back to 1831!!! (notice the key RSI lows are every ~40 years, 1857, 1896, 1932, 1974, 2010-2016?)
Magical 48% (Bear Depth Analysis....45-48% corrections are extremely common going back to year 1900)
SPX and the 3 Bears - Parable or Parabola? (Bull-Bear Parabola Analysis...the rate of bull market inclines and beark market declines have been growing exponentially...target SPX 1100s minimum CY2016)
Bull Market Fib Pattern...Next, bear getting ready to roar like 1923? (Bull-Bear Fib Patterns....suggest bear market underway if SPX breaks below 1822-1851)
Annual Dow Reversals Back to Year 1896 (annual reversals have been extremely bearish about 80% of the time and fakes 10% of the time. The level to watch is Dow 15370 by the end of 2016)
10 Reasons to Retest SPX 667 in 2016 (other well-respected market prognosticators have objective technical systems that have already triggered MASSIVE bear market calls as of August 2015 including Tim Woods, Peter Eliades, Terry Laundry and Robert Rhea)
Custom Discretionary Spending Indicator Projects Bottom April +/- (Projected Oct/Nov CY2015 top and Apr/May CY2016 bottom)
Bear Market Initial Retracement Study Back to 1900 Favors SPX 1700ish next
*** Chart Projections ***
*** S2 System Trading History ***
None...I will start officially appending recent System trade history once the rules are published
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