sp'daily4 - bearish scenario
sp'daily3 - news to come
Summary
The scenario outlined on chart'4 is just something to consider. I am NOT currently trading that outlook, I generally trade around the hourly index cycles.
However, when you consider the weekly charts (including the VIX), there is a 'small' chance we could drop to the low 1300s within the very near term. That would then likely make for at least a 50/75pt bounce before any further waves lower.
Where do we bounce?
We are VERY likely to bounce in the coming days, the only issue is at what level. A very natural level would be sp'1395/1400 - where is there is key secondary rising support (from the Oct'2011 low), fib levels, and this zone is also home to the recent cycle low of 1397.
Lets be clear, it is very possible we'll floor early Thursday in the 1390s. However, I am still sensing we have some way to go. I'm also guessing AAPL earnings will disappoint - with a fast decline to the 200 day MA of $580 - it would certainly put pressure on the Nasdaq and the broader market this Friday.
A final note on the weekly rainbow chart...
Its looking very bearish isn't it? We now have the MACD (green bar histogram) moving to negative cycle, and there is a good downward trend underway.
The only issue is where it stops. I'm guessing a hit of the lower bollinger - around sp'1325/00. This target could take some weeks to hit (if at all), but for many bears, the low 1300s would make for a very nice Autumnal decline.
Goodnight from London