In yesterday’s post I said that I was expecting SPX to reach the 1000 level and that I was going to look for relatively reliable new date projections. Today I could finally sit down and go through some charts and date projections, and what I came up with is a cluster pointing to a bottom (at least, some sort of) between the last days of this year and the first ones of January. Actually, many of the dates point exactly to 01/02/09, which is a Friday and the first business day of the year. Going further on this study, I took the previous significant top in the F3, F5 and F7 series and found out that they also produce a cluster which, to my surprise, starts exactly this week, between the 16th and the 19th.
[I draw this chart before the end of the day, and SPX hit a new short-term high at 918.85]
The faint dotted double arrows show the movements in the F3, F5 and F7 series converging to the period between this week and the first days of 2009. Notice how these movements get larger and sharper with time. The next chart places the focus of a spiral on the top of September 2nd, and this focus produced two other tops: a precise F3 on October 14th; and a F5 (3 days error) on November 4th. F7 is exactly today, December 17th, therefore a top happening tomorrow (Thursday) or Friday will be inside the 3 day tolerance.
The next chart shows that – according to the criteria I use (DMA’s, MACD and Stochastics) – there’s no sign yet of a reversal except for a divergence in volume.
For the more aggressive trader, those who like to anticipate indicators to catch the tip of a movement, I would say to check Retracement Levels for potential reversal levels to go short (with the corresponding odds) between tomorrow (Thursday) and Friday. For the moderate/conservative trader, I would suggest waiting for a more clear sign of a short-term reversal. That is, for instance, SPY closing below DMA 25×5 and/or Stochastics giving a sell sign followed by going into negative territory (below the zero line). Stoploss for this trade will be any high above the top formed between the 16th and the 19th.
I already got a small short position and will gradually and carefully increase it as I feel more comfortable and confident, but I’m particularly cautious in this trade. We are at the end of the year and volume tends to decrease, therefore, since the projected date for a bottom is around the first business day of the year, I don’t know how deep or significant it can be.
