SPX update: 2012-01-20

John Hussman points out that PMI and employment figures are NOT leading economic indicators. They are usually part of a stream of bullish anecdotes before the market turns down. They usually look positive before recessions start. The leading indicators he uses do look bearish.The piece is here: http://www.hussman.net/wmc/wmc120109.htm

Meanwhile, my Base Scenario for a bull market since the October 2011 low will continue to play out until negated by price action. The trend remains up and there is no point fighting the trend, whatever your fundamental views may be. 

We are now in the time and price zone that favours the bears to make their move. All bear counts form the previous update remain on the table. Price action has put some very bullish counts on the table. My main bullish counts are shown below along with levels at which they will be invalidated.

In Yellow is I-II-(1)-(2)-1-2-(i)-(ii)-i, an unlikely, rabidly bullish count that puts us in a third wave. Invalid below 1277.57

In Light Blue is I-II-(1)-(2)-(3). Currently wave (1) = wave (3) in price, but it can extend further. As wave (4) cannot overlap with wave (1) this count is invalid below 1266.73. 

In Green is I-II-(1)-(2)-1 which would allow for a fair sized reversal and is invalid below 1202.37, but probably unlikely if SPX gets under 1250

I will let the market pick the count it likes. Below 1250, the focus will equally be given to bear counts from the previous email. Below 1202 we should see price challenge 1150 and then 1050.