Looking at markets after we got QE3 announcement , we got a fast push higher to 1475 – since the announcement markets has been pretty weak overall and most of the QE3 effect is already priced into the markets over the past months since June 2012.

To me it looks like 1475 was some kind of major high – right now I’m seeing some very bearish patterns which gives me a potential target for this week near 138$ which is the text book target. I wont rule out we will see some support at SPX 1410 but Im looking for some hard downside in markets early this week. If I’m wrong and bulls is strong, they need a push above 1460 to invalidate my view of the bearish patterns.

SPX 1380-1400 seems like quite a big drop from here , but this is what the chart pattern target gives me , so I remain heavy short markets from 1463 still and holding for more downside hopefully sometimes early this week.

VIX weekly chart looking very bullish to me and I think a big move higher in the VIX will occur early this week which suggest a big move down in markets too, so both fits well. Also the dollar (UUP) looks bottomed and I got a weekly chart BUY signal on the dollar which also gives me more confidence that markets will head lower , as a stronger dollar again will set a pressure on the markets.

We had a brilliant week this week – with UVXY gaining about 30% in a few days , and then I mentioned it could pullback from 37$ level for members + recommended to play XIV for a potential move up to 17$.

Then we got a bounce for this week with XIV hitting the 17s target and then I recommended to buy back shorts when we had the bounce on Thursday/Friday.

So if it plays out like the charts suggest , then we could see some heavy selling sometimes early this week – and it will start with a break below 1430 on SPX , as there is not much support until 1410 and then 1400 and finally and hopefully a test of 1380. After this test IF we reach it ,,, then I will be playing market for some short term upside on a bounce, but all in all – I think that 1475 was a major high and we will head down from here again. Ive got some bearish cycles coming up in October so probably earnings will be bad this time and I think we are going to focus on the debt again , both in US and Europe.

Conclusion: I remain short from SPX 1463 and holding short – IF we somehow get a CLOSE ABOVE 1460 ,, I will take off my shorts , as the pattern I see suggest that a move DOWN is to come and not up, but If im wrong I will get out on a stop. The downside target is 1380-1400 area, so I think on a break below 1430 we should see some heavy selling. Both VIX and dollar also suggest that markets could have a sharp move lower.