ORIGINAL POST:  2:30 AM

I’m traveling over the balance of the week, so posts will be a bit spotty.

After bouncing around quite a bit, SPX ended the day on a solid down note.  We closed below the rising wedge, but not quite enough to put a fork in Wave 2 just yet.  I’m looking for a close below 1340 (Tuesday’s low) for starters.

Ideally, we’ll see a bounce up to 1350 to back test the wedge and complete a small H&S; pattern before heading south.  Given that Friday is OPEX, I think it’s actually fairly likely — unless we have the massive sell-off that’s entirely possible with a market that’s this far stretched on the upside.

Daily RSI broke its trend line, and has a ways to go before finding support.  My gut tells me 1355.87 was the Wave 2 top, so I’ve added some short positions.  I’m long puts on SPY (tight stops), SBUX, AAPL, XLF and MSFT and calls on VIX on the IHS completion.

I’m also long the dollar and short the euro and gold.  I’m expecting the euro situation to worsen over the next few days, and at least a .05 move in EURUSD in near term.  Look at the past patterns and you can get an idea what can happen when EURUSD jumps channels.

Weekly

Daily

AAPL came very close to our 529 target and reversed hard.  At 19% of the NDX, it should take the rest of the tech sector with it.   MSFT completed a well-defined Crab a few days ago, and is reversing nicely now.

Gold continues to come under pressure, although prices have been choppy.  I expect it to sell off with the rest of the market next week, if not sooner; but, I’d bail at a move over 1765.

I’ll add to positions if/when the downside gets going, but am the equivalent of about 40% net short, with options comprising about half of that. 

One thing I’m considering doing on the new website is posting actual trades in a model portfolio.  If this interests you, let me know.   The only tricky aspect is putting on trades that the average investor would feel comfortable following: ETF’s, long puts and calls, spreads, straddles (nothing fancy).  I would stay away from futures and most individual stock names.  Please give me your thoughts.

Good luck to all.

UPDATE:  3:30 PM

Revised H&S; picture for SPX.  Whether this holds or not, we’ve clearly broken down below the rising wedge.  The trick will be to close below it and, specifically, below yesterday’s low of 1340.83.

UPDATE:  2:15 PM

VIX just completed the IH&S; pattern we’ve been watching for several weeks.  The nominal target is 25.85 — more than enough to feed the next biggest pattern up the food chain.  This, in turn, will feed a bigger pattern, etc.  See the big picture repercussions here. 

This should get things going for SPX, currently off 4.64.  If we close below 1340 today, 1355.87 will look like the Wave 2 top.   It’s 2.02 above the 1.618 extension on our latest Butterfly pattern (from 1333 to 1300) and is a remarkable 95.03 retracement of the 1370 – 1074 decline.

UPDATE:  1:00 PM

Looks like a beautiful shorting opportunity in Starbucks (SBUX.)  I can’t resist the Mar 46 puts at .42.

UPDATE:  11:45 AM

AAPL off to the races again today.  A reminder, 529.25 is the 2.618 extension on the big Crab pattern we’ve been watching [see: More Crabapples].  We’re also in nosebleed territory, having poked up through the trend line that dates back to 1994.  Look for a serious reversal, maybe enough to mark the top.

UPDATE:  11:00 AM

Well, that has to be one of the weirdest openings I can remember.  The futures were fading fast as the opening bell approached.  The cash market had little to no momentum at all, having reversed off the Butterfly pattern I discussed in the prior post.  It fell from 1358 to 1350.75 from 7:30 to 8:15, feeling trés motive, BTW.

We saw a 50% retrace back to 1354 from 8:15 to 9:13; then, another motivey plunge got going.  As 9:30 approached, the eminis were at 1350.75 — well below the head of our H&S; pattern — and heading south fast.  With any luck, the pattern would be left intact and we could get started wrapping up Wave 2.  If only life were that simple.

The cash market opened and market makers, recognizing the huge shooting star being formed in SPX, freaked out.  Not being the types to let a bearish pattern stand — especially with OPEX coming up in two days —  they threw everything including the kitchen sink into the market.  

They ramped.  What should have been a down or flat opening (futures were at 1350.75, versus yesterday’s cash close of 1350.34) and pumped it up to 1354.72 — 40 cents higher than the previous close and perfectly good H&S; head.

Does it kill the H&S; pattern?  Yep.  It certainly sows seeds of doubt into the EW count, since we now have a higher high — scam turd though it may be.   If nothing else, it extends Wave 2 another hour/day/week until something too big to sweep under the rug comes along.

I almost forgot to mention…the news snippet that upset the bulls’ apple cart last night.  Among other things, it appears that TPTB across the pond aren’t so sure that the conditions they set for bailing out Greece were enough.  They’re “mulling whether to delay a full bailout package for the country [Greece] until after the country’s elections.”  In other words, they want the pledges of the currently elected officials and those who haven’t yet been appointed elected.

This is the EU version of demanding another shrubbery.  Demands to cut down the mightiest tree in the forest with a herring are sure to follow.

Right on cue, we get this priceless quote from Greek President Papoulias, who “tore into Germany’s finance minister, the Netherlands and Finland for taunting the country’s troubled recovery efforts as Athens fights to stay in the euro zone and avert default.”

I do not accept having my country taunted by Mr Schaeuble, as a Greek I do not accept it….Who is Mr Schaeuble to taunt Greece?  Who are the Dutch?  Who are the Finns?”

According to unnamed sources, Mr Schaeuble became quite agitated at Mr Papoulias’ reaction.  At great personal expense, I have obtained this secret footage of the exchange.

ORIGINAL POST:  2:30 AM

I posted the other day about the rising wedge on SPX and, specifically the eminis, commenting: “it has to break down or break out…something’s gotta give.”  Well, how about a break down and break out?

SPX broke below its rising wedge today.  Shortly before the close, it back tested the wedge, looking weak as it did so.  Then came the spike.  Apparently someone leaked the news that the Chinese had decided they could solve the world’s financial problems (or, at least Europe’s) and SPX spiked almost 10 points in a jiffy.

By the time the news was actually released several hours later, the eminis had spiked another 11 points.  As I write this, they have rallied so far as to complete a little Butterfly pattern at the 1.272 extension at 1355.75, so don’t be surprised if the whole thing reverses back to GO.

Looking at the cash market, the level at which we open matters a lot.  If we exceed 1354.32, the H&S; pattern craps out — not the end of the world for bears, but it changes the count a bit.   Many EW practitioners have been calling for a slightly higher 5th wave to end Minor 2.  As long as we stay below 1370, all is well in Elliott World.

BTW, we’re seeing the same kind of divergence we saw 24 hours ago — with equities up much more than the corresponding anemic bump in EUR and AUD.  Don’t you suppose that if the euro problems were solved, we’d see more of a reaction in the currency than in US equities rather than less?  Just saying…

Stay tuned.

Retail Sales

As usual, the economic headlines from MSM are wrong — focusing on the 0.4% seasonally adjusted increase rather than the actual 21% decrease from $459.8 in December to $361.4 billion in January.  Wait, you say, you can’t compare January and December, with all that holiday shopping included!  That’s true, an adjustment is appropriate — just not the adjustment Census packed in there.

UPDATE:  1:25 PM

VIX is coming to life, again.  We had a breakout of the small falling wedge inside the large falling wedge, then a breakout of the large falling wedge itself.  It was followed by a successful back test.

A rise to 21.13 or so will complete an Inverse Head & Shoulder pattern that targets 25+.

A corresponding drop in SPX to 1339 will complete the bearish (for stocks) H&S; pattern there.

UPDATE:  12:40 PM

For anyone following the USDJPY, we’ve seen a pretty strong move today – rising above the SMA 200.  But, a genuine break out will take some doing.  On a log scale, the purple TL/channel guiding prices since 2007 is still intact.   Most troubling for the bullish case is the RSI, which looks to be tagging a TL that’s not been very accommodative.

USDJPY Weekly

Look for a rise through the purple TL, currently 78.54.   A rise above the Oct 31 high of 79.52 would constitute a more bullish wave form.

USDJPY Daily

And, just for grins…

UPDATE:  10:15 AM

AAPL taking a pause right at the 2.24 Fib level we talked about over the weekend.  Note that 2.24 is an acceptable Crab target (1.618, 2.24, 2.618, etc.)  This also intersects with the trend line from 1994 we discussed over the weekend [see: More Crabapples].

Anyone playing the downside from here, however, would be well advised to place prudent stops; the next significant Fib level is way up at 529.

UPDATE:  9:15 AM

Eminis flashing -5 at this time.  SPX will need to trade below 1339 (10 SMA) to confirm the change in momentum and complete the first Head & Shoulders pattern, while 1343 would take prices below the rising wedge.  

ORIGINAL POST:  8:45 AM

EURUSD has broken down from the rising wedge it’s been tracing out (since the first of the year) and completed a successful back test.   It bounced off the SMA 20 last night, having broken through the SMA 10 yesterday.  Further, the EMA 3 crossed below the SMA 10 with the rising wedge break.

I always label my moving averages the same — just to make it easier to keep track of them on busy charts:

3 EMA:  yellow
10 SMA:  red
20 SMA: white
50 SMA: blue
200 SMA:  thicker red

More later.

UPDATE:  9:30 PM

In the 12:15 post earlier, I discussed the two possible harmonic paths for EURUSD.  The path higher has been all but eliminated thanks to a dip below the presumed Point A.

This dip is a break down from the rising wedge and, on its own, would target the wedge base of 1.2623.  But, I’ve got my sights set on bigger prizes — namely 1.2464 on the way to 1.1597.

Here’s a medium close up of the jumbled mess surrounding today’s action:

UPDATE:  2:00 PM

We’re on the brink of either a break-out or break-down, with the market refusing to show its cards.  The 5-min chart perfectly illustrates:

The purple Bat pattern reversed this morning at its .886, as it should.   Since then, it’s traced out a smaller (red) Bat pattern that’s stalled at its .886 — which is right back to where the first pattern’s .886 was!

If we can hold here, it’s a 1-2-1-2 with the next move down sharply.  Otherwise, there’s a pretty obvious 5 waves up being traced out, starting at Friday’s 1337 low.  Since we’re so close to the presumed top of 1354.32, it’s a pretty simple matter to set stops for those inclined to take a bearish position.

Likewise, anyone playing the upside breakout would do well to set stops around 1346ish.

UPDATE:  12:15 PM

Euro rally still muted, with the daily charts pointing to a decline…

 …though, in the short run, a slightly higher alternative is a possibility.  Since Gartley’s complete at a .786 Fib retracement, I’m always on the lookout for that Point D to become a Point B in a larger Butterfly pattern (purple).

The pattern that points to the downside and fulfills the break down from the rising wedge is a Crab (in red.)  We’ll want to keep an eye on 1.3027 on the downside and 1.3320 on the upside.

UPDATE:  11:00 AM

VIX is back testing its recent break out of a falling wedge.

UPDATE:  10:20 AM

I believe this is my first ever copper chart.  If, as many believe, it’s a valid indicator for the stock market, the implications are bearish.

UPDATE:  9:40 AM

The 1354.32 high is still intact, as SPX slightly exceeded our .886 target of 1352.39 at 1352.63.  If all we get is this bearish Bat pattern inside the recently completed bearish Crab pattern, we should see downside momentum pick up throughout the day.

ORIGINAL POST:  9:00 AM

Since the Greek parliament voted to throw their citizenry (almost goofed and called them constituents!) under the bus yesterday afternoon, the euro has rallied predictably.  But, what an incredibly anemic rally… from Friday’s close at 1.3195 to a high of 1.3283 overnight to complete a bearish Gartley pattern on the 60-min chart.  This represents a 78.6% retrace of the recent high. EURUSD is currently trading at 1.3273, up 0.3%.

This, in itself, has to be pretty underwhelming for the bullish case.  The AUDUSD saw a similarly apathetic response — currently up 0.66% to 1.0746 after reaching 1.0777 overnight.  Given that it just broke down from a rising wedge, this .618 retrace smacks of a backtest — as in “the last thing you see before a rising wedge produces a decent decline.”

All this would be interesting enough, but look at what’s happening to the eminis.  They reached 1352.25 last night — a mere .50 from making a new high.  If the the euro itself can’t manage at least a 1% rally and 88.6% retrace, why the heck did US stocks go hog wild with a 97% retracement?

I’m glad I asked. Among its failings, the ECB hasn’t quite mastered the art of turning a sow’s ear into a silk purse.  Perhaps Madison Avenue is too far away, I don’t know.  But, TPTB here in the good ol’ US of A are very adept at turning any event with even a hint of eau de taureau into a full blown, quantitavish second coming.

BTW, that larger rising wedge you see is the absolute end of the road for wave 2 without a breakout or breakdown.  The key will be whether 1354.32 can hold this morning.  The ideal turning point would be 1352.39, to complete a bearish Bat pattern on the 60-min chart and set up the H&S; pattern we discussed last week.

More later.

ORIGINAL POST:

Back on Feb 1, I made a case for 465 as an interim top for AAPL and SPX topping at 1333 [see: Butterflies and Crabapples].  AAPL obliged me by tagging my target on Feb 6, then — probably to spite me — tacked on another 28 points, closing at 493.42 Friday.  During that same time, SPX has tacked on another 1.6% which, compared to AAPL’s 6%, strikes me as a little “divergency”.

Now, inches away from the psychologically important $500/share, is it time to throw in the towel?  Jumping in front of a runaway freight train like AAPL is always a little dicey, but a very precise tag of a 17-year old trend line — part of an obvious rising wedge — makes a good argument for an imminent reversal. 

Way up in the tip of that rising wedge, we’ve completed a Crab within a Crab pattern —  one of my favorite bearish set-ups.  We’ve overshot the 1.618 and 2.0 extensions on the smaller (red) pattern and are closing in on the 2.24 at 505.29 and the 2.618 at 529.25.

There are two possible Point X’s the larger (purple) pattern: 192.24 or 202.96.  Starting at 192.24 puts a 3.618 extension at 490.81, meaning we’ve already overshot it.  

Starting from 202.96, on the other hand, puts the 3.618 at 529.59 — only 34 cents from the above-mentioned 2.618 extension for the smaller pattern.

 

So, we’re seemingly stuck with ignoring a coincidence (529.59 v 529.25) or ignoring a very precise tag of a 17 year-old trend line.  Ugh.  It’s a little like the SPX and NDX, with ample reason for a reversal right here, right now — but a decent argument for a little bit higher.

Last time we saw this strong a bearish rising wedge pattern on AAPL was in 2000.  Check out the rising wedge and its aftermath — an 88.6% retracement.

In 2000, AAPL had also just completed a Crab pattern — at its 3.618 extension (see below.)   It came with head fakes at the 1.618, 2.24 and 2.618 extensions, so it’s not much help in deciphering our current plight.  But, that thin red diagonal trend line is the exact same line as the purple TL on the weekly chart up above.   I have a pretty good feeling about that line…

If it holds, AAPL should reverse very soon — maybe even Monday.  If it breaks, AAPL could tack on another 7.3% to 529 before cratering.   And, if AAPL craters in any meaningful way, there goes the neighborhood.   Either way, long term holders of this remarkable stock would do well to hedge their downside.

GLTA.

UPDATE:  3:55 PM

The NDX RSI trend line was broken on the daily chart.

VIX to 21.98 intra-day high, up almost 40% this week.

ORIGINAL POST:

VIX has broken out of its falling wedge.  We should see some sort of backtest, which will establish a right shoulder in an inverse H&S; pattern, then a run up to 25+.  Note that each target which is fulfilled on an IHS completes another, larger IHS — in a reverse waterfall of ever-increasing values.

I wrote about the same pattern last July, just prior to the market imploding [see: Do You Feel Lucky?]

But, an IH&S; pattern on VIX wouldn’t be worth much without a matching H&S; pattern on SPX, though, right?  Here’s a little one worth watching:

Of course, little ones can turn into bigger ones…

Which can turn into really, really big ones…

More later.

The trend line from May 19, 2008 through May 2, 2011 and yesterday’s close.  Note that it connects the wave 2 top in 2008 to what I believe is the wave 2 top in 2012 — kindred spirits, if you will.  Thanks, again, to RS for pointing it out.

AUDUSD charts, relating to discussion below…

UPDATE:  11:30 PM

What a difference the Oct 27 spike made…

Note how perfectly the yellow fan line off the Mar 09 bottom intersected with the fan line off the Oct 07 high — all at the apex of a big, fat rising wedge.

5 Year

3 Year

1 Year

Then October 27 came along, providing a slightly different trajectory for the rising wedge and, as a result, causing the fan line from 2007 to miss.  The new fan line from Mar 09 carries pushes the rising wedge apex up and out in time.  It’s made a difference of 35 points and two weeks.

UPDATE:  5:00 PM

Gold continuing to show weakness after breaking the RSI trend line.   The critical tests will be breaking out of the little purple channel and then taking out Fan Line 3.

If those should both occur, we could see a dramatic drop to complete the Crab pattern at the 1.618 extension of 1203.

UPDATE:  2:30 PM

Keeping a close eye on NDX, which should reverse course at 2571 – 2575, the confluence of three Butterfly patterns — one going back to 2007 and the others three and six months old.

The NDX’s rise is all AAPL today.  Like SPX, the leadership is becoming more narrow and volume smaller by the day.

The 2nd biggest component, MSFT (intra-day high = 30.8) faces a flaccid future.  It completed a big Bat (purple) at 30.53.  It’s also running into a Butterfly completion (yellow) at 31.54 and a second, small Butterfly completion (red) at 30.84. 

Two weeks ago, a Butterfly stopped INTC cold.  It’s currently clinging from a crumbling cliff, right at the 1.618 extension of 26.93.

Note that it was clobbered at the more common (for Butterflies) 1.272 extension at 25.27, only to recover and climb up to the 1.618.  Crabs sometimes go higher, reaching extensions of 2, 2.618, 3. 3.618, etc.  But, Butterflies are stuck with 1.272 and 1.618.  Bad news for INTC and NDX.

UPDATE:  1:00 PM

VIX, which has been carving out a massive falling wedge for months, showed signs of breaking out today.

 The rate of change just turned positive and is threatening to break another TL on the daily chart.

ORIGINAL POST:

A few of the go-go stocks are lending credence to the fact that this rally is simply overdone…

SBUX RW – out of room

CMG RW, Massive Divergence

Crab Complete

AAPL Crab going for 200?

GOOG Negative Divergence

WFM RW, Crab and Neg Divergence

Then, there’s COMP itself.

And, perhaps my favorite chart, the RUT.  It sports a touch of the fan line from Mar 09 (dashed), a completed Crab (yellow), a completed Bat (purple), a completed rising wedge (dashed lines) and a tag of the May 2 trend line — all on negative divergence and falling volume.

This is about as bearish as you can get and, as a broad based index, is much less susceptible to overly narrow advances and manipulation than SPX, COMP or DJIA.

More later.

UPDATE:  5:10 PM

NDX came within 3 points of one target and is dangerously close to the other.  Recall we have a very complete-looking rising wedge that might have a little upside left, depending on how it’s drawn (whether the Oct spikes are included or not.)  The intersecting harmonic patterns include:

• a Butterfly that began July 27 and is still under construction, reaching 2545.84 vs its 2548.2 1.272 extension target today (the red Fib scale)

• a 2nd Butterfly that began Oct 27 and offers a 1.618 extension at 2574.31(the purple scale)

If it’s the first pattern that plays out, it could happen any day.   The other is only 29 points away — one decent day of +1% or so — and is a cleaner fit for the rising wedge.   It’s also practically on top of 2571, the 1.272 extension of the October 07 (2239) to November 08 (1018) Butterfly.

AAPL is a big component of the NDX, of course, so we care how it’s doing in its patterns.  It exceeded its Crab pattern target by 11 points today, which is enough to stop out most stocks.  I don’t have any positions in Apple itself, but if I did I would tend to allow it slightly more wiggle room.

The USD changed direction as expected, right at the intersection of fan lines we discussed a few days back.  We’ll continue to watch closely, as an über-bullish resolution to the Euro situation could easily blow my forecast out of the water.

And, the flip side of the call, the EURUSD respecting the diagonal we’re watching…

ORIGINAL POST:  1:00 PM

Not much going on today.  All eyes on Greece, but no news of any substance other than…there’s no news.  The Guardian is running a dedicated page, updated by the minute, for those who want to be notified the very instant that nothing happens.

There’s been a bit of talk the past two days about an escrow account being set up to handle the upcoming Greek payment.  I just read a pretty good article here.

The gold selloff that began Friday is continuing today.  There’s a test coming up at 1700, which besides being psychologically significant, represents a trend line off the August, September and November highs.  If gold bounces there, the latest decline from 1766 will look like a back test.

UPDATE:  3:30 PM

Consumer credit for December and Q4 was just released.   First, the manipulated adjusted numbers, the ones most financial journalists, the WSJ and CNBC will report:

Looks great, right?  Who wouldn’t get excited about a 9.3% increase in credit demand?  Think of all the iPad’s that’ll buy.  Here are the real numbers:

The nominal 4Q2011 v 4Q2010 increase was 0.1% for non-revolving credit and 5.5% for non-revolving credit.  Significantly less when you back out inflation.

The nominal quarterly growth rates (versus prior quarter) are as follows.

                                                  Revolving    Non-revolving

                Q4 2011                       4.3%              1.4%
                Q3 2011                     0.76%             2.24%
                Q2 2011                     1.00%              .88%
                Q1 2011                    -5.70%              .89%

In other words, it took a massive 4.3% increase in the 4th quarter of 2011 for revolving debt (credit cards) to get back to where it was in the 4th quarter of 2010.  This increase, BTW, occurred during a period of non-existent income growth.

In the 4th quarter,  credit card growth was 3X faster than non-revolving debt — that which typically accompanies larger ticket purchases that drive more sustainable growth in production.  Non-revolving debt growth slowed 37.5% from Q3 to Q4 — not the kind of stats recoveries are made from.

UPDATE:  1:45 PM

In light of Apple’s surge this morning, it’s no surprise that NDX is making a move.  However, it should be short-lived.  It has reached to within 37 points of its 1.272 on the big Butterfly pattern, 11 points on the smaller Butterfly and is very deep into a rising wedge with apex at these levels.

The NYSE Comp is closing in on completing a bearish Gartley pattern at the .786 Fib level of 8225.37 — just 1.8% above current prices.  I place much more credence in a broad index like this than the DJIA, which is struggling intraday to stay above its May 2011 high of 12876 — even as it completes a rising wedge and (as long as it stays below 12876) a double top.

UPDATE:  1:00 PM

The USD is poised to rebound strongly.  It has back tested an important fan line from June 2010 (bold dashed white) that marked the 10/4 and 11/25 highs, as well as another important line (bold dashed yellow) from July 2008 that has stopped several declines.

There is also ample support in the way of RSI trend lines on the daily chart…

…and a completed bullish Butterfly pattern on the 60-min chart.

UPDATE:  11:50 AM

AAPL just completed its Crab pattern at 465.87 and is due for a decline that, at an initial .618 of the XA distance, would take it to the lower bound of its rising wedge — around 404, for a 65-point swoon.  There should be substantial support there, as well as the SMA-200 at 380.

Like most of the rising wedges I’m watching, this one is long in the tooth and very far into the apex.  AAPL has actually exceeded its upper bound, is showing exceptional negative divergence, has tagged an RSI trend line going back to Apr 2010 — all of this on falling volume.

I love my Apple computers, but at these prices this market leader is looking downright buggy.  It should go without saying, but I’ll say it anyway: Apple has been a runaway freight train.  While these patterns indicate a significant downturn, this is one stock to be very cautious of when applying any bearish strategy.  Use stops.  Oh, and another thing… use stops.

The Euro, in the meantime, just touched an important Fib level on its corrective wave and tagged its daily RSI trend line.

While the Greece situation is anything but settled, this could mark an important turning point.  This last run up was so steep, it wouldn’t take much to upset this apple cart.

Note, also, that the diagonal (the dashed white lines) that marked the last step lower is now acting as resistance to the corrective wave up.  And, the RSI on the 4-hour chart is bearish in two different directions — as a top and a back test of the last month’s rise.

ORIGINAL POST:

It’s been a little too quiet the past few sessions.  Neither bulls nor bears have been able to mount a sustained push.  Everyone, it seems, is spellbound by the drama playing out in Greece and the veracity of last week’s employment numbers.

I tend to believe Greece will ultimately fall in line.  The establishment’s threats have fallen on deaf ears, so it’s time to pull out the bribes — or maybe just pull out the checkbook and kick this particular can down the δρόμος.  It will be distasteful but, with the amount of money at stake, TPTB understand well the relative bargain.

There has been so much written about the employment numbers, it’s been hard to nail down the truth.   Many have accused the BLS of manipulating the numbers.  I think that goes without question.  Just look at the past year.  In almost every case, the revisions of previously released numbers have been less rosy — sometimes much less so.  The misses are anything but random.  On the other hand, the market seems content to accept the “good news” on face value, and sometimes there’s no convincing folks who are enjoying a lovely cruise that a life jacket should be kept close by.

I put much more faith in technical analysis than fundamental, but it’s interesting to note that only 59% of the 184 S&P; 500 companies who’ve reported Q4 2011 earnings have beat expectations — a three year low.

Here’s the big picture in SPX just prior to the opening bell.  Note there are two possible fan lines from the Mar 09 bottom — one including the October 27 spike and the other which doesn’t. 

 

The harmonic picture is a bit muddled, since we’ve exceeded both the .886 retrace of the 1370-1074 plunge (1336.86) and 1.272 Butterfly target at 1329.11.  My gut is that last week’s spike was a throwover, but we won’t know until it’s over.

The rising wedge has filled out to nearly its most robust potential — taking into account Oct 27.  It’s very, very mature and clearly nudging its apex.  Keep an eye on the lower bound, as a break of this trend line will likely result in a decent decline.

The key level in a decline is 1292.  A breech will damage the most positive wave count.

VIX continues its melt down, touching the lower bounds of its falling wedge within a falling wedge and remaining below a .886 retracement (18.11) of its run from 14 to 48.

Stay tuned.