The indexes closed moderately lower for a seventh day, and we're now far below the QE highs of sp'1474. All those bull maniacs who were seeking a year end close in the 1500s, are really starting to get twitchy. The VIX closed effectively flat, and Mr Market is still yet to see even moderate 'panic'/capitulation.
So..yet another day where we saw an opening minor rally fail...a lot of price-chop, and late afternoon weakness. Even though we closed off the lows, today's price action is very impressive for the bears across the mid-term.
Adjusting the minor counts/wave outlook
A few days ago I did an hourly cycle count on the transports. That has really worked out well, and has the cleanest index cycles I'm seeing right now. So, I'm using that as a guide for the SP/Dow.
I've come to conclude that we have not yet seen a wave'4 - as I had labelled until yesterday evening. Instead, it seems we are STILL within a significant wave'3 decline, with a multi-day wave'4 bear flag to develop sometime around the thanksgiving holiday period.
I am now looking for the indexes to provisionally floor sometime around Dec'11th. I'm not going to get too fixated on that particular day, but 'mid December' will remain a time when I would not be shorting anything again until January.
Indeed, a Santa rally is something the bears should actually hope for. Let the maniacs have a multi-week rally, and put in that critical first lower high on the weekly cycle.
Here is an updated 'rough guide' to what I'm seeking on the daily cycle...
*Special note on the fifth wave (black) of blue'1.
I'm not at all sure yet where we might floor. With black'3 being 80pts lower (so far), maybe if we rally 30pts from 1340 to 1370...and take off 75-100pts - the 'capitulation wave'..that would get us into the upper 1200s.
Right now, its just a vague price guess, what I am more confident about is the time frame of Dec'11.
The multi-month target of sp'1200/1175 looks increasingly likely, the only issue is whether that target zone is hit in December - via a fiscal cliff market panic, or if it takes until early spring 2013.
A little more later