Which Story is the Right One?

Okay...lets take a look at two different scenarios. As a Permabear, it is always a battle to be open to both sides of the story, but I continue to challenge myself in that regard.

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.

Closing Brief

A quick update on where the hourly cycles closed.

*much more later this evening, including the VERY important moves in the Euro-indexes earlier today.

Sp'60min

VIX'60min

As noted earlier, it looks like the short term floor is in. We've had a very clear 5 waves lower, and now we're due some kind of bounce. 2% back up would be a normal 50% retrace, and would get us back to the sp'1385/90 level. Maybe 1400 is already out of reach?

VIX putting in a few spiky tops, certainly starting to look like that's the max' for a few days at least, maybe even as long as 2-3 weeks.
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More later.

Good wishes

2pm Update, Thats...'probably' it

..at least for a few days.

Sp'60min cycle

Looks like low 1360s is the very near term low.

*there is some serious technical damage being done on the weekly cycles though, and the monthly cycles are now starting to rollover.

Most bearish of all right now - the European markets, which got smashed up today.

More after the close.