With the two market leaders - Trans/R2K, leading the way lower, we have some clear breaks of trend on the daily cycles. The bigger weekly cycle is offering sp'1770/50s, but that really is 'pushing it' for the best bearish case. First things first...a break of 1830, and then 1800/1790.
sp'weekly7
Summary
The above scenario really is a bold one, and frankly, I'd be surprised if we do break much below 1800 within the next week or two.
Of course, if 1883 was a key intermediate top, then we should (at least in theory) come down to around the early Feb' low of sp'1737.
With the lower weekly bollinger band rising each week, breaking much below 1770 (as of next week) looks to be damn difficult. I would keep open the H/S formation...so long as we at least briefly hit 1765...but would be much more comfortable if we saw the 1750s.
Looking ahead
We have the usual weekly jobs data, homes data (10am), and GDP Q4 (final reading).
*there is sig' QE-pomo of $3-4bn...bears need to be cautious, however there is then an 'open window' of no-QE until at least next Tuesday.
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Still hoping for 1800/1790
This week sure has been a battle. We've seen four consecutive daily reversals, but today's was far more powerful - especially for the Trans/R2K. The following chart outlines what might be a somewhat complex H/S formation.
sp'60min1b
Regardless of how you might want to count/label the formation, if we do break <1830 - taking out multiple key supports, then bears should see a further 2% downside. The fib' 61% retrace in the 1790s would make for a natural floor - and that lines up with rising trend support on the bigger daily charts.
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I remain heavy short, with 'line in the sand' short-stops at 1884/85. Right now, I don't expect that to get hit. Instead, I hope to get an exit in the low 1800s next week.
I should note, if we do gap lower Thursday, I will look to drop a secondary short block (SPY puts)..and re-short on any intraday bounce.
Goodnight from London
