8/6 Weekly Commentary

Had a good day today.  Made a little in futures and bought SSO near the low.  Still holding 2% over the weekend. I'll be posting a dollar and gold analysis later this evening (could be late).
The great debate is whether this market stretches all the way to 1175 or stops closer to 1145. 
I'm going to show trendlines for the SPX.  You decide if it looks like a duck or a swan.  As long as it respects the upper and lower trendlines I'll look for a blowoff "throwover" and sell that.  EWI now labels the advance from 7/2 as a diagonal,  so let's treat is as such.  Computation of the high on the I1 turn date 8/13 is 1147.  A throwover puts it 4 points beyond that, 1151.

Doing the same exercise for the DJI puts the high for 8/13 on the trendline at 10,810.  A throwover puts it at 10,840-10,850.

Guess what.  I show weekly resistance on the DJI at 10,844 where the 172 and 360 week M/As converge.

So that's the spot I'm going to pick.  From Wednesday on I'll put an order shorting at DJI 10,840.  The downside sell point is the 5-minute, 380-unit M/A -1.35% and SP futures 90-minute, 180-unit M/A -1.35%:

Here is the I1:

We all realize the implications of this I1 turn date. 
1)  The I1 began a prolonged period of depressed values extending into May, 2015.  Such an extended period of sub-par values will place enormous pressure on the downdrafts. 
2)  This is the initial I1 period where the trough occurs below zero.  While not perfect in the historical record, almost all such occurrences resulted in particularly sharp declines after the index passed +4 on it's way down. 2008-2009 did not have a period with sub-zero I1 values.  The leverage unwinding in the system for this period should be magnified by sub-zero I1.  Leverage remains very high.
3)  There are data series which did not make into the I1 which are bearish from August 18 through mid-November.  These have good forecasting records, but revision of the I1 is something that I will avoid unless it's forecasting record can be improved measurably. 
4)  I measure the 4-year cycle with a trough of 11/1/2010.  I am not using this as a precise bottom date.
5)  I concur with EWI that the 2008-2009 bear market counts as a single impulse wave.   The rally from 3/2009 stopped at major weekly resistance which is highly unlikely to be revisited.  Therefore, the wave from this high will be a 3rd of 3rd of 3rd.
6)  This I1 downward period will break the neckline of a large head-and-shoulders dating back to last year and measuring down to about 7,500. 
My expected bottom date based on I1 is 11/18/2010.  If the market collapses and the daily technical composite is -32 or lower on 10/26/2010 then that will be the low.
Followers of this blog have kept their powder dry and made money on this 800-point rally and it is almost time to unleash the capital.  During this I1 downdraft I will be trading less and maintain high core short positions.