SPX plunged 86 points yesterday to 2839.64, 4 points below the Day 13 optimized price target indicated by our analog [see: Analog Watch July 15] when last updated on Aug 5.

The dilemma that target posed is that SPX already tagged it on Aug 5.  It was unclear, therefore, whether we’d get a slightly lower low or closing low on August 14 before the strong bounce ensued.  I posted a slightly lower secondary target at 2816.47 that would accommodate the analog and another at the SMA200, now at 2795.73.

The other dilemma is that SPX peaked two sessions early.  I adjusted each turning point forward by two days but, as we discussed at the time, an adjustment wasn’t necessarily appropriate.  We’ll only know for sure when the next bounce commences.

Several hours ago, it looked as though the 2816 target would get tagged.  Futures reached 2817.75 around 3:30 ET (yes, I was watching…I lead a very exciting life.)

It didn’t last, however.  So, anyone holding short for the idealized target in the cash market could face the same dilemma as on Aug 5 when futures tagged an important downside target (the SMA200) after hours and bounced before SPX had a chance to follow suit.

Regardless of whether or not SPX makes it down to 2816.47 (probably) or 2795.73 (possibly) yesterday’s collapse was an excellent test for our analog.  It is very clearly on track.

Speaking of things going as planned, DB just tested its Jun 3 lows. It has a long tradition (thanks to a very generous Uncle Mario) of bouncing at horizontal support — sometimes for years.  So, I’d take profits here and only re-short on a drop through 6.49. The charts indicate lower prices ahead — though it’s always possible the ECB will come up with a better solution than lowering rates and increasing QE.

While we’re on the topic of easing…anyone happen to catch this morning’s economic data?  Retail sales and labor costs hardly support a rate cut, let along multiple rate cuts.  From Briefing.com:

continued for members…

Back to SPX…I’d rather see a dip to 2816.47 than not, but it doesn’t matter so much as long as SPX rebounds sharply over the next two sessions and returns back to these levels next week.

The drop was inspired by the 2s10s inversion.  USDJPY didn’t need to tag its .707 again……and VIX didn’t need to make new highs.The 2s10s is still loitering near zero, so I think there’s a better than even chance that SPX joins ES in tagging its .707 and fleshing out the rising white channel.  ES often probes lower prices and rebounds in time for the cash open, whereupon it revisits those lower levels with SPX.By closing below its SMA200, DJIA also suggests that we have another leg lower in the works.UPDATE:  10:20 AM

As readers will remember, SPX topped out two days before it was supposed to.  I adjusted everything forward two sessions to reflect the shift in timing, noting at the time that this was crap shoot.  The analog could maintain the initial time targets even though the top arrived early — meaning that SPX wouldn’t bottom until tomorrow.

The dashed white trend lines intersect the .707s at the close today or open tomorrow, indicating that this is a very good possibility.  The fact that SPX is currently in a holding pattern supports the notion. I’m going to duck out for a quick errand, should be back around noon.

UPDATE:  12:45 PM

Yep, definitely looking like a holding pattern with the .707 tag coming at the close or at tomorrow’s open.

Doesn’t look like SPX will need much help to get there.  VIX might not even make a higher high.CL might be able to hold the yellow TL, saving the plunge for the 9/11-9/13 plunge.  Not so sure about RB. More later.

UPDATE:  4:00 PM

I still see nothing to convince me we’ll open higher in the morning.  We had 5 lower highs in a row, and several lower lows. And, DJIA closed below its SMA200.The next big decline forecast by our analog is scheduled to occur between Aug 27-29 and Sep 11-13 — about 220 points (7%.)  Interesting that I just came across some Nomura research pointing to the same time frame as a good candidate for a “Lehman-like” sell-off.

https://www.cnbc.com/2019/08/06/nomura-a-second-market-sell-off-could-be-lehman-like.html