The ULTRA Timer Report

S1 is again nearing horizontal resistance R2. The last time the SPX reached R2 (01/03/07), it reversed so fast we didn't have a chance to exit. Since we expect R2 to turn the SPX back down again, again, we will try to get out of this market as long as the SPX is above 1420 at our mutual fund cutoff time.

Since S1 is now at ~1410, there may not be a lot of downside after this sale. However, as we said in the last update, the market is far overdue for a ~10% correction.

The only way to exit at important market tops is to exit at unimportant tops that end up being important. We could get lucky and watch the SPX obviously take out S1 on its way to a significant correction. More likely is that the market will make it hard on us and drop to S1 forcing us to make another decision.

On the other hand, if R2 is taken out, then we'd probably jump back in expecting another run at R1 which is now about 1450.

XOM (Exxon-Mobil) Breaks below S1

We've been calling for a drop in oil to ~$40/bbl for many months. XOM is finally starting to reflect the recent drop in oil prices. We expect an eventual drop to S3 abour 65 which would be a 17.4% correction off the top.

XOM may rally back up to 73 or so retesting S1 which we'd consider an excellent selling opportunity. We expect XOM to eventually drop to S3 and then bounce back up to over 70. Then, XOM would be in a position to form a Head-and-Shoulder Top (HST) with S3 as the neckline. After the bounce creating the right shoulder, S3's failure would confirm the HST and imply a further drop in XOM to around 50 or lower. In longer term charts there is huge support at around 40.

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