Wednesday, January 4, 2012

S&P 500 ~ Big Picture ~ 4 January 2012

It's been a bit more than three months since my last long-term update for the SPX.

During these three months the market moved almost as expected: Early October we got a decline below 1100 to complete five waves down from 1370. Then, on October 5th, I turned bullish and expected a three wave move to 1260ish. At the moment we're a bit above the 1260 level but it looks like we're in the last wave of this correction:

Both counts are very similar, at least short- and medium-term. At the moment I don't really care which one is correct as we can assess the situation again once we are around SPX 1000.

1160 and 1200 are the important levels to watch. If we break below these then the next downwave is most likely underway i. e. a sell-off to ~1000 should occur. The SPX shouldn't rally much above 1310 though else these counts are very, very unlikely.

Although these two counts look pretty good I always like to be as objective as possible and the rally from the October low has already retraced more than the usual 62 % so the following count is an alternative you definitely have to consider:

What if the correction (wave [X]) already ended at 1075? Maybe we're already in wave [Y] up towards new all-time highs (I know the economy is in bad shape but after all we're only 300 handles away which isn't that much since the market has already rallied 600 handles from the lows (and the economy wasn't in better shape back then...)).

In my opinion the level which has to hold is 1200. In fact, we should see a quick rally back to 1370 during Q1 2012.

To sum up, the counts point in different directions so I suggest to use the 1200 (or 1160) level to make your decision. If we're below it = bearish and above = bullish.

I think we'll know within a few weeks which way the market will most likely go this year so check out my daily updates. ; )