I laid out 2 likely paths for SPX in today's earlier post with Mon/Tues/Wed likely chopping around into the FOMC announcement before SPX decides which path to take. Personally, I am leaning towards the bearish path down to SPX 1750ish around Feb 1 +/- followed by a multi-week rally back near 1900.
Today's action has possibly formed a bullish ascending triangle which typically breaks upward. If so, the measured target would be SPX 1922ish. OEW has a pivot range at 1922-1936 and I see potential resistance points at 1913-1920 and 1930-1935, so I'd be careful with longs on any gap or rally that approaches the 1920s. Hopefully, the System will be able to enter lower if at all based on the criteria I laid out below.
I have 2 interesting observations to add.
1. Bear market rallies that don't reach or exceed ~50% retracements of 10%+ drops are at risk of severe failure like occurred before the largest CY2002,2003 and 2008 swoons. However, if the market can form slightly lower lows or higher lows in such situations with a positive divergence, the end of the bear market is likely near. Both CY2002-2003 and CY2008-2009 saw positive weekly divergences in RSI5 and RSI14 for the last 2 bottoms which could not retrace 50%. The risk of severe failure grows once bear market conditions exist such as if price cannot break above the w20MA while below the w200MA and with the w20/50MAs trending down.
2. The last 2 bear markets each had 7 to 10 swoons of 10-20% depending on exactly how you count with CY2000-2003 seeming to have a couple more swoons than CY2007-2009. Also, the CY1929-1932 bear market had at least 7 such swoons by my count, and the CY1937-1938 bear market had 4-5 such swoons depending on how you count. If you look at CY1938-1942 which had a lower high than CY1937 and lower low than CY1938, you end up with at least 8 more 10%+ swoons. Even CY1973-1974 appears to have 5-6+ swoons of 10%+. I only observed huge weekly charts, so I would have likely only counted one 10% move if the market moved down 10%, up 10% and down 10% again in a matter of a few weeks.
That likely means every cyclical bear market in the last 3 secular bear markets has had 5-11+ swoons of 10-20%. If my exponential parabola theory is true, the drops in CY2015-2016 could be larger and/or faster than CY2007-2009, but, given history, we should expect at least 5 and probably 7 or more such swoons in this bear market. So far, SPX has fallen 2135-->1867 and 2116-->1812. If SPX were to fall something like 1920-->1730 into Feb 1 +/-, it would still look like a continuation of the previous move on a large weekly chart even though it would technically be another 10% swoon.
So, by my count and regardless of what happens the next 2 weeks, SPX is heading into February with two 10%+ swoons in the bear market thus far. Although one could argue the first swoon was the last drop of the CY2009-2015 bull market, my main point is that one should expect 3-5+ more swoons of 10-20% before this bear market is over if you believe we are in a CY2000-2016+ secular bear market like CY1929-1942. It supports my minimum SPX 1100s target. If you also believe much of the damage will be done in CY2016 like me, then we should see 2-4+ more of those 10%+ swoons this year. My custom spending indicator projects another one in April +/- leaning towards April/May. Other cycles and analogies I follow are favoring a significant low in April to June and again in Oct/Nov. I personally think we'll get huge swoons into those 2 time periods plus a couple more in between. 10-15% swoons are more common but at least one 20%+ swoon is likely in CY2016 based on secular bear market history.
Perhaps somebody could quantify those 2 observations better for me but I think the high-level observation is valid and I am satisfied with that. Good fortune.
*** S2 System Summary ***
Trading Position: Long 50% at SPX 1869, 0% at SPX 1897, 100% on neutral hourly score
Hourly Score: -30%
Daily Score: -50%
Daily Trend: Up
Weekly Trend: Down
System Rules (coming soon)
*** S2 System Commentary ***
The System did not re-enter long since the bearish hourly and daily scores did not neutralize much at all. When SPX dipped mid-day, too many bearish bets were made which probably fueled the late-day rally back near the high. Unless SPX steadily rallies all day Monday keeping the score too bearish for a safe long entry and assuming SPX does not gap down to 1869, the odds are that the System will be re-entering long at some point Monday.
*** 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)
- S2EW analysis back to 1831!!! (key RSI lows every ~40 years, 1857, 1896, 1932, 1974, 2016?)
- Magical 48% (Bear Depth Analysis....45-48% corrections common back to year 1900)
- SPX and the 3 Bears - Parable or Parabola? (the rate of bull market inclines and bear market declines have been growing exponentially...target SPX 1100s minimum CY2016)
- Bull Market Fib Pattern...Next, bear getting ready to roar like 1923? (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 ***
I will start officially appending recent System trade history once the rules are published
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