SPX Q1 2012 forecast

After catching the End of the Panic of 2011 I have been nervously carrying a bullish bias with minor modifications to the wave counts for almost 8 months now. It has been difficult psychologically. The market truly has climbed a wall of worry during this period, as it has encountered stiff resistance with a very negative macro background.

Over the past 8 months various technical resistance points has been methodically and decisively overcome. While staying alert to bearish possibilities, all this while my main count has remained bullish. 

Technical analysts must always maintain respect for the price action and allow the wave structures to inform their bias. In that spirit, note that last week's rally vaulted over the trendline connecting the Jan 2008 and April 2011 tops. Structurally, this is a very bullish event that is difficult to ignore. Coupled with the fact that the Nasdaq and DJIA have been "leading"  this advance, and that the Nasdaq already taken out both the previous highs, I can now confidently focus to the most bullish of the three bullish counts that I have been carrying in 2012.

In the chart above I layout a roadmap for the rest of Q1 2012. I think the market will now start to digest the gains of the past month. I expect the month long wave (3) to complete its internal wave 3 soon and correct in wave 4. In doing so it must stay above the wave 1 extreme at 1285. Wave (3) should then complete with a rally in wave 5 to challenge the 2011 highs at 1370. Beyond this we should see a wave (4) correction and another rally in wave (5). 

The internal structure of these upcoming waves is too far out to be predictable. 

For the next quarter I expect to see support in the 1285-1300 range, and resistance in the 1350-1375 range. The overall structure should be sideways, perhaps with a slight upward bias. 

I also will keep an eye on the VIX as it finds support in the "Greed" zone. Any visits to the "Fear" zone should provide buying opportunities for the SPX.