There is no longer any question about the near term outlook. The last three days of price action are very bearish, and the VIX is completely confirming this initial move lower.
Dramatic declines are ahead, along with the VIX exploding into the 30s..perhaps 40s. There will be VERY strong bounces along the way (today's closing hour was again a pretty fierce reminder), with multi-day bounces at times. The primary trend though, is down.
A close view of the daily cycle shows the very strong three daily bearish candles. We're now decisively below the lower channel of what was a wave'2. There are plenty of levels to take out just to get to the recent 1266 early June low, but they'll all be swept away across the days and weeks ahead.
We have three consecutively smaller towers on the MACD, and the third was indeed the prime opportunity to short this market last Friday.
The bigger view is a very bold outlook, but sp'1100s are the target zone.
*The 1.6 Fib extension targets (as recently posted), are sp'1170, with VIX 35.
**the latter post-Sept/Oct scenario is entirely dependent upon the actions of the printing maniacs at the Fed -and other central banks. If they do enough QE, then we rally into the Spring, otherwise, it'll fail across mere weeks, and then we collapse below the critical sp'1100 level (see monthly chart) - as Mr Market realises the US will join the recesssion club.
Today was too annoying for me to trade. It is frustrating on days like today when the market just doesn't give a clear enough re-short opportunity. There was simply too much risk of upside..as indeed the last hour did indeed show.
Looking ahead to Wednesday
With AAPL earnings providing a somewhat stark miss, the market is set to open lower. Yet, we did close pretty strongly. Lets see if the underlying cycles will play out, or if we just drop from the open..and keep going as we did today.
I will look (somewhat desperately) for a re-short opportunity, but if we open 1325/20.or lower..it will be difficult to find an acceptable entry.
In any case, I wish to be short ahead of the Thursday and Friday econ-data. I believe that gives the bears their first shot at breaking the recent support zone of 1310/00. If we can close below 1300 by the Friday close, then it is indeed time to set Condition One throughout the bear fleet.
Goodnight from London
ps...a reminder on the bigger picture....to keep everything in perspective!
sp, monthly, 6yr, H/S formation theory