Despite the Santa rally and the early January advance, SPX is still below its October 2011 high. The current upswing should likely end above the Oct-2011 high based on the larger wave structure. However, signs that SPX could truncate should not be overlooked:
[1] The Dow is already meaningfully above its October 2011 high (Chart 2), presenting an interesting divergence at the moment. Can the broad market catch up? [2] For the very near term, a failed triangle / consolidation area as marked by the green count in Chart 3 should be at least near term bearish, lending support to the bearish leading diagonal count (blue, Chart 3 below). A breakout upward would offer a chance to grab 1300 in SPX. The green count is intriguing with its layered triangles.
[3] From a time perspective, the 3-month rebound since the early Oct-2011 low is now adequate with respect to the 5-month sell-off from the early May-2011 high, and offers a potential fib turning point.
[4] Last but not least, VIX is likely tracing out its final subdivision of its multi-month decline from an EWP perspective (Chart 5 to the right). Valuation-wise, VIX is inching toward fair value with respect to the most recent market volatility, which is unlikely to be sustainable going forward.
In other words, the minimum requirement for a swing top has been met (Chart 4, below). The top tick is in sight.
