First, lets look at the bullish market scenario.
Sp'daily
VIX, daily
The simple bullish outlook is that we are very close to a floor - if not already. So long as the market does not break 1340 - a very major level, market should be fine to resume another major multi-month up cycle. First target would be 1435/40, with an ultimate upside target of 1550 (see monthly chart)
We have two major issues though to note. There is the constant threat of the Bernanke doing more QE - along with other ECB QE initiatives also. Second, there is the Facebook IPO. They sure won't be listing that wretchedly over hyped nonsense if the market is in freefall. I guess they could pull the IPO, but...its just something I think is worth keeping in mind. I think a lot of bears will be a lot more comfortable, once the ultimate hysteria social-media IPOs is listed.
Now, lets look at the 'doomster' outlook...
Sp', daily - bearish outlook
VIX, daily - bearish market outlook
First, we have the very real possibility of a large H/S formation developing in the SP. The floor would be around 1340, and then a bounce back up to 1380/90, before a severe wave lower to at least 1270/50. A 'doomer' wave'3 would arguably target the monthly wedge/channel low of 1150... sometime between May and October - as the following monthly chart again highlights...
Sp'monthly..simple chart
In terms of the VIX, and bearish count..we may have just completed a wave'1 higher..and now need to pull back for a few days, maybe even a week or two. What matters is we put in a higher VIX low, and then proceed to bust above the critical 24/25 level.
If we see VIX 26/27 at any point, we'll know some 'exciting' times are ahead. A challenge to last years peak of 49 would be the first target for the doomster bears. If 49 broken..then 60/65.
So, which story will it be?
As someone who is inclined to a more doomster outlook, I'd naturally say the latter. I could write a lot about how dire the fundamentals are, but plenty enough people are already doing that, just go see Zerohedge, Mish, or any of the other good sites. However, for now, I would just want to emphasise the following....
I've been thinking it over for the last few hours, and I have to come to this conclusion...
"What matters most of all, is how the monthly cycles close in April, if we see April monthly cycle close net-red, then it'll be flashing the first sell signal (even if its a moderate one) for over 7 months. Short positions, with 'serious money', can be taken with a stop at the April peak of Sp'1422."
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My overnight posting (probably dealing with the Euro indexes) will be due around 9pm EST.