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SPX Update: All Roads Lead to New Lows


The very short-term is less clear than I would like, but the big picture seems fairly straightforward.

MINYANVILLE ORIGINAL The short-term picture in the S&P 500 (^GSPC) is less clear than I would like it to be. On Monday, the market tagged my 1336 reversal target (okay, I was $.48 off) as discussed on Friday, and reversed immediately; so far, that's been the high for the move. One would think I would be supremely confident at this stage, but let me explain why there's still some lingering doubt over the market's short-term intentions.

Before I go further, the big picture outlook continues to believe that the trend has changed at intermediate degree, and that the trend will continue in the downward direction for some time to come. Initially, I'm looking for a retest of the October 2011 lows, and ultimately much lower. We'll examine that in more detail when it gets closer.

Moving back to the short-term outlook: The interpretation I'm using as my preferred count is a bit challenging because I'm basing it primarily on the view that the decline from 1334 to 1266 was a three-wave move. However, it's a bit unorthodox for the larger fractal of an a-b-c expanded flat (blue (a )(b )(c ) in chart below), due to the length of the b-wave. Generally, the b-wave of an expanded flat won't exceed 138.2% the length of wave-a, and this one does. So it's hard to be exceedingly confident in this view.

Further complicating the matter is the fact that the rally from 1266 to 1335 is clearly impulsive (meaning it has unfolded as a five-wave move), which does fit as wave-c (my slightly preferred interpretation), but could also fit as wave-a of a new a-b-c fractal.

Accordingly, I've charted both potentials. The first chart shows the a-b-c expanded flat (preferred count).

Click to enlarge

The second chart shows a close-up view of this same count, with some potential targets and trade triggers.

Click to enlarge

The third chart outlines the idea that this rally was the first leg of a new a-b-c for wave (ii).

Click to enlarge

Finally, a simple chart of support and resistance for the SPX.

Click to enlarge

In conclusion, both wave counts are looking for significant new lows over the intermediate term, and new lows for the week (perhaps after a small bounce) in the next couple sessions. The short-term should clarify a bit as it unfolds.

On a Lighter Note

And last but not least, a bit of exclusive breaking news. The big news item of late is still the European Union agreeing to bail out Spanish banks (euphemistically referred to as "bank recapitalization").

The mainstream news outlets have reported that Spain did not approach the International Monetary Fund to request the €100 billion loan -- however, my sources have revealed otherwise. As a matter of fact, I was able to obtain conclusive proof that Spain first asked the IMF for the 100 billion euros, and, fearing austerity measures, actually went to the EU as a last resort.

Utilizing a source who wishes to remain anonymous, I obtained a copy of the letter sent to Spain from the IMF. This exclusive evidence is reprinted below:

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