Ready for a trend change? Equities turn setting up gives you this week to position for it

Are you ready for a trend change? We've been discussing it so much that we've got to be sure we're really ready for it! Although the action this week, while likely quite choppy, may not show it obviously, until we get to the week after. For that matter, it doesn't gave to revolve around Wednesday, 1/13/2010 ... but it's really looking that way. I'm going to show a couple of weekly and monthly charts in reviewing the context. And cite some other analysts' work that interesting to include this weekend. First a note: I'm not going (in this post) to review again the reasons for the equities market turn. Probably the only new item is my recent note of the VIX 90% retrace being about 16.91, and it's getting close to that. Okay, I will continue showing parts of it here and at the UBTNB3 blog. If you're a new reader, just browse the prior posts including those of the last few weekends, to get filled in.

Plus I'm rather confident the turn will be addressed by Tony Caldaro in his OEW weekend update, and by Terry Laundry in his. We'll be including those in separate posts here this weekend. What I DO suggest my readers focus on, are two things:

1) Being ready for a significant correction in the stock markets, likely to last into March (at least).

2) Being ready in case it's only a 5% pullback, or similarly shallow correction. Or turns into "the next big one" that leads to a retest of the March 2009 lows.

Bears will be disappointed if it's only a shallow pullback. Bulls will be disappointed if it continues down to retest the March lows. Traders who remain unbiased will join us in analyzing what the turn will mean. I've got one cycles expert source (I'm not at liberty to name) who agrees with the view advanced by Terry Laundry, and by Raymond Merriman, that the markets will pull up again and continue holding up through May - and maybe through August. After that - bears can run wild!!

Or maybe it will retest the March lows first - so let's not be complacent!

Either way - honestly, I can see the markets moving higher up into August. Elliott Wavers can think in terms of a continued B wave, or even a large bullish diagonal triangle (not my preference). Wolfe Wave enthusiasts may see a bullish setup once the March lows are in. The Benner-Fibonacci cycle supports it, though a January high in 2010 could be enough. I even suspect the sunspot cycle supports it! Or if you just like the Presidential Cycle (which we covered in a post around New Year, under "Cycles (other)" label), you might find support in its indication of upward movement through then (though it doesn't answer what's next - the other methods do).

But of course we need to focus on this week. If my personal effort to gauge the waves are working, I'm looking for a low sometime Monday and a high sometime Wednesday. A drop, and probably rebound lower high on Friday. Just the way I'd see it working. And no definitive confirmation likely until the week after, when a continued drop will help cornfirm a trend change to downtrending.

Here's what's being pointed out by some others (I'll add to this list as the weekend progresses):

Safe Haven | Do NOT Trade Against This Indicator - By Marty Chenard, at http://www.safehaven.com/article-15413.htm. A very interesting way of charting liquidity. It also gives me the impression that 6650 in the NYSE ($NYA) is a logical place to look for support on the drop we're expecting. At least initially - maybe it'll be part of what helps us see whether or not the turn becomes "the big one".

FSO Editorial: "Still No Decisive Move" by Carl Swenlin of DecisionPoint 01/10/2010, 1/8, at http://www.financialsense.com/editorials/swenlin/2010/0108.html.

While I think a medium-term top is a strong possibility, I have no reason to think that a long-term top is likely. My Chart Spotlight article of 12/18/2009 still reflects my view for all time frames. Our Thrust/Trend Model (T/TM) is still on a buy signal as of 3/17/2009.

Bottom Line: We have been in an extended period of low volatility, and a period of high volatility is sure to follow. That will probably materialize as a medium-term correction; however, the long-term technical outlook is positive.

And some charts. The SPX will test its 160-month moving average at about 1158/1160 area, which fits with Terry Laundry's upper envelope and Tony Caldaro's projections, perhaps Andre Gratian's too. Some find it meaningful that we just hit another Fibonacci level on my weekly chart - at 1144, the .618 retrace to 1440 which was a very important high in early 2008. I can't disagree - just how significant, may help show what comes next, but we'll still need to observe the structure of the coming drop. I'm thinking that a 50% correction to about 950 area can be fitting. First of course we must verify that a turn does occur, and we probably won't be able to do that until next week at the earliest. If a pullback actually gets support higher, like 1030, the story may turn out very differently.