Just when it looked like the SPX was going to escape the bears caught it and roughed it up. This is very negative. First of all a failed signal (regrdless of how faint) lends extra strength to the signal the opposite way. Today’s bear riot owes its vigor both to the long protracted pattern coiling since December and to the failure of the “sneak-out”. And today’s downwave pierced the trendline as shown — not the most important trendline, but then, all trendlines have some importance. Theoretically a day like today should be followed by a bull move tomorrow. If this does not happen better fasten your seatbelts and get ready for some nasty weather.
We should repeat here — that a trendline penetration is always subject to confirmation. Magee thought that a 3% penetration was necessary for a high degree of certainty.
Of interest, the euro appears to have broken out and we may buy some of it tomorrow. But — we may need the capital for hedging. Gold and silver got hammered and we repeat our aversion to a position there until the chart is more constructive. While we never enjoy days like this (especially since the psychiatrist cured us of masochism) we remain fully invested and expect to punish the bears (doc didn’t cure us of sadism) handily in the near future.