Short Term SP update and possible Triangle pattern.

Last update for the year, shorter term update for the day traders out there. Next short term upside target for the benchmark comes in around 1310 spx as shown in top chart above. This will take out the last swing high marked as the horizontal red line. Trend line support shown rising below. Of course in our last post long term next upside target continues to remain 1376 approximately.

The chart below is the SPY or the exchange traded fund that most closely tracks the S+P. It appears to be forming a triangle pattern with downside trend line support below and upside resistance above. The Blue horizontal line just shows where we started the 2011 year trading at. A breakout in either direction will produce a nice trending move, of course you know my bias coming into this, I believe the break will be to the upside barring any unforeseen macro events.

Going Forward... Redux

Surprisingly the market made a break to the upside last Thursday on apparent Euro-Zone can kicking. And this week it appears we have successfully retested the breakout point giving the next upside projection to be approximateltly 1385 on the S+P 500 if you take the length of the last few month's trading range and add it to the breakout point.

This seems like a logical first upside target, then expecting the market to take a break there before proceeding into the 1420 - 1470 zone.

Refer to this previous post from February on the significance of the 1470 level, as it matches in length the bull market we had during 2003-2007. Key Levels still remain.

A weekly close below 1215 on the SP 500 would invalidate any upside target and would mean the drop to 950 is back on.

Otherwise it's risk on.

Another Wave Down Likely.

We got some price stabilization right at our first support level below, which coincides with the 38% retracement of the current bull market from the March 2009 lows. So what happens next?

Well my model calls for another wave down likely to complete the Domed House pattern of the Three Peaks and a Domed House for you George Lindsay followers out there. I expect prices to continue to rally back into the 1230 - 1270 area over the next couple of weeks or so, with a slight chance of even returning to 1290. From there I expect another drop, the question is how big will the drop be?

Well I believe it will basically match the size in length of our last drop from the May highs to recent lows, that created approximately a 270 pt S+P 500 drop to our support level. Using these numbers going forward I would expect a similar drop to possibly take us below the 1000 level on the S+P depending on where the high is put in.

Again refer to the previous post as the 935 final support level will be key to keeping the bull market structure intact. Hypothetically as long as that level doesn't get violated to the downside, the potential is always there for price stabilization and new bull market highs eventually made maybe as soon as next year.

But as always trade safely and stay well hedged, I can not emphasize this enough!

S+P 500 down to 1160 then up to 1520.

The market has sold off a bit more than expected here by taking out 1270 to the downside on global macro slowdown concerns. A deeper retracement to entice buyers is now expected.

We had a 210 pt drop in 2010 from the April highs of 1220 to the July 2010 lows of 1010. And a subsequent rally of 360 pts proceeded.

A similar drop from the May highs of this year would take us into the 1160 area. We have plenty of confluence in the 1200- 1160 to boot. I expect the market to make it's low around this level.

An estimated 360 pt rally should occur at that point which will take us into 1520 on the SP 500 somewhere during or after the 2012 elections.

Market Update (SP 500)

Well the short term picture is unclear, let's review what has happened so far. We had a correctional pull back into our support zone and a proceeding rally just above our noted resistance area to watch in the last post. Now what's next....

Even though today's sell off was done on less volume than Tuesday/Wednesday of last week the fact is the 1330 level was rejected as unfair and sellers stepped up in force and maintained control of the entire day session with little to any rotations to the upside.

I now have to be prepared for a potential drop into the 1270 - 1280 area. With Oil prices once again looking to regain control of $100/barrel , but I can not rule out the possibility of a double bottom at last weeks low pointed out in the above chart. I will use that low as my line in the sand for the short term bulls.

Now why 1270 - 1280?

The bottom chart is a weekly chart of the SP 500 futures, I see a measured move long taken from the 1224 high from November 2010 to current highs created 2 weeks ago. The midpoint support levels as noted on the chart come in approximately 1285 - 1270. As confluence I have added the volume profile to the right hand side. As you can see the high volume demand in the 1280 - 1270 area on the profile highlighted by the black horizontal lines. I expect to see buyers come back in to attempt to push prices back up to new highs.

Regardless, I still fully expect to see this market trade at least 1360 - 1380 in the coming month(s) and quite possibly higher. Which may be the end of this bull trend for awhile.