Bears have the upper hand now.

 Friday's session changed very important elements in wave counts for S&P. Breaking the low of 1291 canceled the possibility of being in a 3 wave decline from 1422. It also overlapped potential wave 1 top of October 2011. The move from 1422 March top is almost a perfect  textbook 5 wave. What we need now is for the 5th wave to be completed in 5 waves of lower degree. My target for the end of this 2 month move is 1250 area. 

Pitchfork support and wave relationship (wave 5= wave 1 and 3 *61,8) give me 1250 as most probable target. 1270 is the next most possible bottom and least possible is the area above 1200-10. Selling this decline is too risky if you take under consideration that we are in the final stages of this wave. The implications of such a decline and the fact that it cancels so many bullish scenarios is quite frightening.

 Long term support lies at the area of 1250 where the middle pitcfork also lies. Of course 1100 and 1000 levels if broken, 2008 bear market will be relived in greater magnitude. Lets hope we will not reach those levels.

 

Moving closer and zooming in the 5th wave of S&P we observe that we are in 3rd wave down. This 3rd wave might not be over yet, but if it is, a consolidating 4th wave below 1295 could give a short term bounce. 

The fact that the 1st wave of the 5th is extended, might mean that the 5th wave could be short lived. The 3rd wave of the 5th is already larger than wave 1 and wave 5 can take any size(wave 3 is not the smallest). That is another reason why I prefer to be patient when considering a  new short position. Wave 2 may follow and as we know, it will have to take as much time as wave 1 and may fool lots of people that the uptrend is back at play. This doesn't mean we shouldn't try and profit from such a scenario. Wave 2 could rise even up to 1350-60.

All the above are based on the assumption that 1422 is wave 2 of C top, and the 3rd wave of C started. Targets are below March 2009 low. The form and the time the market moves will give rise to bullish scenarios also that we will have to take under consideration. At this time however, bears have the upper hand.