Sunday, June 10, 2012

SPX Update: Overnight Futures Rally is No Surprise

On Friday, I suggested that the market looked like it needed to make a higher high over the short-term, and based on the futures action on Sunday evening, this appears likely to occur.  The futures market is very excited, because apparently Spain is going to ask the EU for a loan for its failing banks.  Yes, you read that correctly. 

In any case, further upside was expected -- the question I posed on Friday was of degree.

If the futures rally sticks, and there are no guarantees it will, then it appears that last week's slightly more bullish count of wave (ii)-up is in play.  Before we discuss that in more detail, let's consider the possibility that last week's wave (4) count is still viable.  The cash market is the final authority, so let's see how things go on Monday -- this count may be eliminated right at the open.

Below is the chart for the more bullish wave (ii) rally.  Please note that both of the count above and the count below are only short-term bullish, and intermediate-term bearish.  My preferred view remains that the market has changed trend at intermediate degree.

The first target for the count shown above is near 1345, the second target is near 1370. If the market materially exceeds the second target, we'll need to give additional thought to more bullish big picture potentials.  Accordingly, I have prepared an alternate big picture chart, though it primarily examines the structure of the decline.  Potential upside targets for the alternate count start in the 1480's.  So I would continue to caution long-term bears to pay attention to the 1365-1370 zone -- if the market reaches and breaches it.

This more bullish big picture count (below) remains the alternate for now, and may not even come into consideration, depending on how the next few sessions go.  However, I do want to publish it, since I've been kicking around the possibility for a while.

In conclusion, further upside was expected by Friday's outlook -- but as I warned, the extent of the upside was (and still is) unclear.  We'll simply have to see how it develops over the upcoming sessions to sort out the short-term potentials.  Trade safe.


  1. With today's action, big gap up, and bigger reversal down, how do you now see the DJIA moving this week.
    Was the move down corrective in a short term rally as your projections in the SPX are/were 1365-1370 area. With the VIX spiking above what I consider the pivot of 22.5, I am leery being long very front month, for a move back up and through Fridays high. Looking forward to your opinion, you write very well, clear and concise opinions.

  2. Thanks. Today's action actually fit the preferred count perfectly with the reversal at 1336 (first chart in Monday's article). The alternate short term count (the second chart in Monday's article) did not come into play, since 1343 wasn't broken. ________________________________