SPX Update: Short It 'Twas

My connection remains as unstable as the banking system, but in the prior update, I promised a photo I took in-between hurricanes Madeline and Lester, while we were getting 25' waves on the eastern shore.  This was taken on the same street where I live, and the power of these waves was pretty mind-blowing.  The ground, and my house along with it, were literally shaking every time a big breaker pounded the shore (roughly every few minutes).  In fact, several large chunks of the nearby coast broke free from the cliffs (two sections that were maybe 10'x6') and fell into the ocean during the storm.

In the end, the storm never hit us directly, and turned out to "just be a little" wind and rain here -- but the ocean waves told the story of the storm's true power, had it hit us instead of veering away.

So here's the photo... This was taken at dusk, as the last of the sun's light faded from the sky; and a slightly-long exposure smoothes (or "smooths," depending on which grammarian you ask) some of the ocean's chaos, creating almost a sense of tranquility:

Moving on to the market, last update stated that "the only way I can view a pattern like this is as a potential short op," and predicted that the market's next move was more likely to be a decline to 2157 (and perhaps beyond) than a rally through resistance. 

Before I go further:  I've recently learned that there was some confusion from a small minority of readers over my use of the word "before" in the update.  What I said was: 

"It's more probable that 2157 will be retested and/or fail before the market can break out over resistance." 

Apparently a handful of readers took that statement to mean:

"We'll decline to 2157 -- or some presently unknown price that could be much lower than 2157 -- and that unknown and unstated price point will be a buy opportunity, so you should go long on the predicted drop.  Because THEN we'll rally straight back up through resistance."

Suffice to say that interpretation simply never occurred to me, since, for one thing, I made absolutely no mention of the current pattern as a long opportunity.  To the contrary, I stated plainly that I could only view it as a short opportunity.  If the entire annotation is viewed in context, it seems self-evident (to me, anyway) that my use of "before" was another way to say "a decline to 2157 happening first is more likely than a breakout happening first."  In the same way one might say, "I'll bet we see 2000 SPX before we see 2500 SPX" -- the only way one could take a statement like that as bullish is if one was already biased that way (consciously or otherwise), and simply hearing what they want to (or fear to) hear.

I am aware of this tendency in human nature, but have not found a way around it.  More than once, I have had a bull tell me that my "bullish" update (which I thought was a "bearish" update) was exactly what they thought too -- or had a bear tell me that my "bearish" update (which I thought was "bullish") was exactly what they thought too!  It's like the scene in Dumb and Dumber where the girl tells him his chances with her are one in a million, and he replies, "So you're telling me there's a chance!"

Anyway, for future reference, if I'm trying to call the market two moves in advance, I usually make that pretty plain; typically by saying something along the lines of: "It looks like we'll decline to 2157, then rally back up to new highs."  Or "any pending decline should probably be viewed as a buy op."  Or any number of things.

Now, all that said, although my focus last update was only short, I'd be remiss not to mention now that it IS very possible this decline will ultimately turn out to be a buy op.  The thing is, given the strength of Friday's decline, there are probably a lot of trapped longs.  And the downward wave doesn't look quite complete yet, so "buy op" isn't something I can focus on until we see at least one small impulsive wave in the upward direction, in order to give us a clear level to act against.

Keeping it simple, there's nothing much to do here if you missed Thursday's call to short:

In conclusion, there are several potential patterns on the table here, but no clear high-probability pattern, at least until the market tips its hand again.  The smartest thing to do at a time like this is trade safe, or not at all.  The market will tip its hand again soon enough.