FOR THURSDAY: (1/11) Did we react too quickly on the China news? Have to see what happens on Wednesday night. The rumor is now unconfirmed so will it be back to business as usual? We got caught in the knee-jerk reaction and now have all kinds of conflicting data.

S & P ANALYSIS FOR THURSDAY: (1/11) A 3-wave bounce for a secondary high would go to 2758.50. If you got short, have to have stops above 2753.50 and even 2752 is too much. We’re more clear that Friday is lower and so we have to think that a secondary high can come in.
OVERALL: S & P broke 2740 and 2760 was close enough to 2762 to have completed 5 waves up. That could mean that the 70-point pullback into Friday is starting to 2690. The most bullish interpretation left would be hold 2730 and matching the 30-point correction we had on the last day of the year and then going to 2790. Given our orientation toward weaker action into Friday and somewhat dire news out of China—that could change—we have to go with shorts now.
CYCLE SYNTHESIS: Lower into Jan. 12; lower into Jan. 19.

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