Friday appeared weak on the surface, but it is deceiving because the index close was only 6 points lower than the June 8th low. Financials have been pulling down SPX, but capitulated on Friday with a powerful surge up late in the day. The strong reversal in the Financial sector to the upside is a warning for bears.
The low VIX is another warning sign, and in my view signals a relief rally to commence shortly. I see VIX spiking up eventually as fear sets in, but not until later on (after a relief rally) during the "Freefall" phase.
Last week, SPX coiled up, like a spring, and I see this breaking up with a short squeeze. The target is 1315. Following the relief rally, a Freefall to the calculated 1239 target is anticipated.
I'll use 30min charts and my timing cycle charts to fine tune the smaller movements and timing more precisely.
This is an update on my "2007 Top" cycle, and I've shown how it relates to our current trading patterns in the market. I'll expand further on the big picture at a later date.
The Financial sector is approaching my long time target. The timing cycle indicates a breather bounce is due. Only a moderate decline in July is expected after a bounce. Avoid shorting Financials!