SPX and Chevron: Low-to-Mid 1200's Likely Just Around the Corner

As I warned yesterday, it appears likely that the next wave down has indeed kicked off.  There are still other potentials (always are), but I'm going to stick to talking about what's most probable right now.  There are invalidation levels to watch, and if the market approaches those levels or throws a major curveball here, then we'll examine the alternate probabilities more closely.

(If you're new to Elliott Wave Theory, it might be helpful to cover the basics, as discussed in this article.)

The current expectation is that the S&P 500 is headed to the mid-1200's at the minimum, and ultimately much lower.  It will be interesting to see if the central banks mount another attack soon, or if they're going to drop the "equities must stay inflated at all costs!" approach, seeing as it's basically done virtually nothing to improve the real economy.  Unless you count making the prices of gas, food, and everything else higher for Americans as an "improvement."

The first chart we'll examine is the intermediate expectation.  This chart makes some assumptions, and is skewed to the side of being "bullishly" conservative.  The alternates to this count are much more bearish.  In any case, these projections will almost certainly need to be revisited at the next swing low.

The second chart examines the short term outlook.  There's a new bearish trade trigger that will elect beneath 1298.90.  (Please note that triggers are active when beneath the pivot and suspended when above it.)  This trigger targets 1262, and that number lines up perfectly with the expectations of blue wave (3).  When two different methods of calculation yield the same target, it often means that target has an above-average probability of being reached.

The third chart is the one-minute SPX, and is provided largely for educational purposes, to help those who are playing along at home and attempting to learn Elliott Wave Theory.  Note the (b)-wave triangle, and how wave (c) of red 2 is an almost perfect .618 ratio of wave (a) (there's that golden ratio again!).

And finally, Chevron (CVX), which has been a cash-cow for everyone who's followed along since I called the top near 112.  Yesterday, Chevron made me beam like a proud father, and did the "how close can I come to hitting projections to the penny?" dance (check yesterday's chart for comparison).  Hopefully it will keep playing along.

I've drawn-in some targets for blue wave 3 and red iii.  This count is invalidated with trade above 100.86.

 

In conclusion, the projections from early May (mid 1200's) still look solid and everything still appears to be on track.  Honestly, the main thing making me a bit nervous is the fact that everything's played out so well to this point.  Sometimes the market will decide to smack me around a bit after I've been on a win streak for a while, so, you know... fair warning.  The levels are pretty clear here, so barring an invalidation level being crossed, it should be smooth sailing for bears to new lows.  Trade safe.

Reprinted by permission.  Copyright 2012 Minyanville Media, Inc.