12.20.2011 -- Santa showed up...

Looks like the market finally decided it wanted a Santa rally to close out the year and window dress the quarter.

Quite a big up day for little news and equities definitely decoupled about halfway through the day from the EUR/USD and Gold. Oil and the 10 year yield tried to keep up, but equities were just on a mission of their own.

We will analyze what today meant in todays chart.

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Key Levels

Upside -- 1248, 1262, 1310

Downside -- 1230, 1216, 1203, 1196, 1121

(just like that.. we are getting lopsided to the downside already)

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SPX Daily;

So here we have the result of today.

While we took out a couple of overhead resistance areas, we didn't take out anything significant except the 50dma. Thats probably why the market was able to produce such a large rally.

We appear to have closed below or right at our previous channel and we are still right in the middle of the large narrowing wedge.

I've outlined where I think the market might be heading between now and say middle/end of January.

I think we'll headfake out of the top of the large wedge and then proceed to plummet.

I do though think that they will be able to thrust this up into the end of the month after a bit of pullback from today.

Middle of January is going to be a very prime opportunity to short this market.

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Oracle missed earnings pretty badly and was down 8% or so AH. That will weigh on tech stocks tomorrow if the market had any grand ideas of a big follow up rally. Although, you would have thought the vote down of the pay roll tax extension would have at least blipped the market today, but it did not. Everyone just hit the buy button on the computers and went to the mall today.

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As a side note.. I am expecting my 2nd child soon, so I may suddenly disappear from posting at some point here soon. Once that happens, I will be removed from posting and the markets for about 2 weeks or so. So, don't worry, i'm not dead or anything, I'll be back. ;)

GL

CJ

12.19.2011 -- Pinged the 100dma..

Today we exactly pinged the 100dma and the bounced but only slightly.

There are only 2 key levels of support left at the 100dma (1203) and the bottom of a large wedge we are tracking. (1184) Underneath that is air til 1121 and then air again until 1098.

The Stochs are still in the middle on a sell and the MACD just turned negative. There is still plenty of room for selling if the market so chooses.

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Key Levels

Upside -- 1213, 1229, 1251, 1260-1265, 1310

Downside -- 1203, 1184, 1121, 1098

(running out of downside support, may get lopsided soon)

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SPX Daily;

This chart shows both the large wedge and the channel. We are below the channel, so support on that is lost at the moment. What we have left is the 100dma and the bottom of the wedge.

If those 2 areas of support were to get taken out on a close, things could turn ugly in a hurry. In particular breaking that big wedge south would really send the market into a hissy fit.

The Stochs are at 49 on a sell and the MACD just turned negative, so there's still plenty of room for selling.

We MAY get a couple days of bounce off of the 100dma that we pinged today. Hard to say if we do or not because the bounce intra-day was so weak, but it's possible, however I think would be something short term to try to close out this week with on some kind of positive note.

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The financials took the big hit today. The Russel 2000 was trying to hold ground and then gave up late in the day. Some of the momo stocks were holding their own.

Leaders are disappearing though. Stocks like AMZN and LULU that were strong leaders have had a really brutal couple of months.

Right now we are left with IBM, GOOG, AAPL, CMG, HANS and a hand full of other stocks that are holding up and near highs attempting to lead.

The chart patterns for these stocks do not look good though. HANS and CMG for example both are building what looks to be a large bearish rising wedge.

Commercial real estate is also holding up relatively well still. The desperate search for dividends is still strongly in play.

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How this week ends could be pivotal to what happens very short term. A poor ending to this week heading into Christmas that takes out support could be potentially devistating. We'd only need about 20 more points south to do so.

GL

CJ

12.15.2011 -- Rejected the 50 and bollingers..

Not much of a change today. We attempted to rally on the obviously unmanipulated government economic rally. We rejected resistance basically where the 50dma and bottom of the bollingers are hanging out.

That sell off put us right back into empty space, below the bollingers, below the 50 and 200 and with the stochs still near the top and on a sell.

Today was the markets chance to get back over the 50 and back up into the bollingers on the good data and set itself up for another run into the north pole.

it failed.

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Key Levels

Upside -- 1225, 1239, 1256-1264 (heavy resistance area), 1310

Downside -- 1202, 1180, 1121, 1098

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SPX Daily;

Same chart from yesterday updated. You can see where we rejected resistance and how we are floating in no mans land where I don't think the market has any choice but to fall to next support at 1202 and try again to bounce and gain momentum.

Not a lot else to add here.

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Only other note from today is that IWM/Russel 2000 held up well today, it heavily outperformed the other indicies. It's pretty much what kept the market from turning red today.

Most of the big name leaders from the rallies several days ago (CMG, MA, V, GOOG, IBM) they got whacked yesterday and did a lot of nothing today.

This is a whipsaw market devoid of leadership working inside a government with major issues facing it.

In other words, this is a bear market.

GL

CJ

12.14.2011 -- 1 area of support left..

We have continued selling off. Lots of nervous longs, I'm sure, that were expecting a santa rally. If the market is going to try to pull one off still, it is going to try from the zone I have labeled in tonights chart.

Commodities got rocked today. Liquidations galore. Oil, Gold, Silver, etc. all took massive hits today. The 10 year was heavily bought.

What does this tell us? Lots of fear of the Euro collapsing.. the result of that would be a dollar surge.. commodities would get hammered and there would be a mad rush into safety into already ballooned US treasuries.

Folks think the Euro is going to fail.

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Key Levels

Upside -- 1223, 1228, 1234, 1260, 1283

Downside -- 1207, 1180, 1121, 1098

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SPX Daily;

Same channels from yesterday. I've labeled our support zone. This is the last area of defense for this market to initiate a santa rally from. If it does make that attempt, I think it will only be a short lived bounce from support here before continuing lower.

You can see we are just rolling in the stochs and still positive on the MACD. Which essentially means there is still tons of room to fall.

The bottom thin blue line is the bottom of our big wedge. That is the last line of defense for this market. If that breaks, theres the potential for a cascading waterfall down type move.

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Market participants are obviously worried here. While it wasn't a huge down day for the market averages, it was a massive down day for commodities in general and a huge up day for bond prices (down day for bond yields).

The EUR/USD broke significant support to the downside. Gold also broke significant support.

See Gary Kaultbaums report today;

http://garyk.com/?p=2149

Both of these things are indicating that what we saw today; massive commodity sell off, massive run in bond prices, and massive sell off in the EUR/USD. That those things are going to continue and possible continue at a feverish pace.

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Something to beware if you are short...

All these things scream deflation in the United States.. on the back of a soaring dollar in the face of a collapsing Euro.

If Bernanke sees what I am looking at.. and obviously he does. He's going to be quite tempted to initiate expectations of more trillions of liquidity being flooded into yet another program.

Nothing keeps Bernanke up later at night than the thought of deflation. Inflation is his good old buddy, his drinking pal, his long lost brother. Deflation is his nightmare from hell.

Just dont be surpised to see Bernanke hinting at some Trillion dollar program if we continue to see the same type of movements we saw today in the markets.

Bernanke probably is not sleeping well tonight.

GL

CJ

12.13.2011 -- Not looking good for a santa rally..

Not a real good close for the market today. It was a wide trading range that closed deep in the red.

We took out the bottom of the bollingers and now the only things standing in the way of a fairly big sell off is the 50 and 100dma's.

You might start to get some nervous longs here that were expecting the santa rally that see another day like today and only 7 trading days until Christmas and think that maybe we've already seen whatever we are going to get.

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Key Levels

Upside -- 1235-1240, 1255-1265, 1285, 1310

Downside -- 1221, 1208, 1180, 1164, 1121

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SPX Daily;

I modified the channels again. This is a pretty complicated pattern that can be drawn many ways. That large wedge, yesterdays fork, todays channels/fork. I'm not sure yet which one is correct, you could really fit all of them. So think of them all as just crayon scribble guidelines.

Right now, I think the concrete things to pay attention to are the bollingers and the moving averages. The rest is fuzzy at best, including EW as there are a number of possible counts both short term and long term.

So key for today is that we closed below the bottom of the bollingers. This typically can set off a cascade of selling where the market continues to sell off below them and stays below them for quite awhile as the bollingers rollover and catch up.

What could stop us is that the 50 and 100 are both within 20 points below us.

So if the market wants to use one of those as a springboard and fit in a santa rally, it can do so soon.

If we take those out however, all bets off and theres only 4 areas of support before the market would hit air and really fall off a cliff.

Another key item from today was that we were up quite a bit and put in a reversal and closed pretty deeply red. This isnt one of those classic days that mark tops where the market is up 250 and closes down 250 and marks a big reversal top... but it is a day we were up 100 on the DOW and closed down 70. We haven't had an intra-day reversal like that in quite awhile. Most days lately have been maybe a quick reversal in the first hour and then run with that direction the rest of the day.

Because I think longs may get nervous here with so little time left til Christmas and bad earnings from Best Buy and below concensus retail sales data.. I think we are about to embark on a selling spree here.

GL

CJ

12.12.2011 -- Market is in a position to sell off..

If it wants too.. that's a big IF right here in front of christmas, the way the technicals are set up, the market has an opportunity for a good drop here if it so chooses.

Details to follow....

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Key Levels

Upside -- 1243, 1262, 1282, 1305

Downside -- 1221, 1205, 1140, 1121

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SPX Daily;

Our old channel just wasnt working anymore, so I replaced it with this fork and smaller channel. The large wedge is still in play as well, but I didn't draw it here because it gets too confusing with the new fork in there as well.

So, details of why this market is set up to sell off here;

1) It seems like we are just whipsawing up and down here.. BUT, the bollingers are rising.. so while we are basically in the same spot we were a couple days ago, the mid bollingers have risen above and we bounced off the bottom of the bollingers today. So we are in fact taking out support.

2) The bottom of the bollingers, the 100dma, the 50dma and bottom of the channel are all clustered within 30 S&P points down. 1 really big down day or a couple good sized down days could take out all that support. If that were to occur, we would be left with hardly any support down to about 1140 for weakish support and then back to our 1121 support.

3) The bollingers are curling over, the 200 and 100dma's are both still in a downward trajectory.

4) The Stochs and MACD are both sitting at a point that could kick off a severe round of selling for several weeks before being very oversold.

5) Nobody would expect a big decline right into christmas.

so.. we shall see.. but the opportunity is there. the set up is there. we'll see if the market shows its hand at all.

GL

CJ

12.08.2011 -- Resistance held..

As suspected, the resistance was stronger than support and we fell pretty hard today as there was a large air pocket until first support.

We bounced off the mid-bollinger bands, but did close near the low of the day.

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Key Levels

Upside -- 1263, 1303

Downside -- 1229, 1217, 1211, 1196, 1174, 1121

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SPX Daily;

You can see we broke back down into the bollingers and then stopped just at the rising mid-bollingers, but still closed near the low.

Will be interesting to see what happens from here. The 100 and 50dma's are not far below here and at the moment it appears we are holding as that large wedge.

From and EW prespective, we probably have another rally coming to the top of the channel, but that doesn't have to happen. There are possible scenarios which allow us to just tank right here and now.

For now though, unless we break back below all MAs, I will stick with my previously outlined outlook of selling off here and then producing yet another strong rally into year end.

GL

CJ

12.07.2011 -- Rejected again..

Not a lot to add today. We again took out the 200dma and then proceeded to close below it. We also pinged the trendline that could be forming a large wedge instead of a channel.

Rather than burning off some overbought, we just seem to be getting more overbought on the daily during these last few days of gyrating.

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Key Levels

Upside -- 1263, 1266, 1301ish

Downside -- 1257, 1244, 1223, 1212, 1183, 1170, 1121

(Getting very lopsided now)

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SPX Daily;

Not a whole lot of change from yesterday. We rejected resistance again.

The market is running low on time here on getting over the 200dma. What happens here soon may clue us into whether this is a big wedge or a corrective channel as we are rejecting the 200 and the top of the wedge right now.

We were falling today back into the bollingers and the market managed to stage the rally and close just back on top of them.

We are wedged here into a very tiny space of resistance and support.

I think the resistance is stronger than the support and we are overbought.

GL

CJ

12.06.2011 -- Rejected the 200 again..

Nothing dominated the headlines today, so I will refrain from another anti-ogliarchal rant.

But even with nothing in the headlines, we rejected the 200dma again. Pretty much the same as yesterday, except today we printed a little red DOJI candle, but still closed above yesterday.

The stochs are starting roll now.

I see the futures are up at the moment, but I dont believe it at all. A rollover is probably imminent here for the next move in this pattern.

Of course, barring the EU discovers a herd of euro shitting unicorns in the hills of Ireland.

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Key Levels

Upside -- 1264, 1270, 1300ish

Downside -- 1252, 1212, 1177, 1169, 1121

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SPX Daily;

Same chart as yesterday, but showing how we rejected the 200dma yet again. We are still hovering about the bollinger bands. If we cross back into those, there is no support for about 40 points.

The stochs are topping as well.

Another thing I added is what looks to be another important trendline at the moment that has us potentially forming a big wedge rather than a channel. If it were a wedge, its huge and the resulting move out of it would be very large. Its a somewhat neutral wedge with a slight lean towards a bearish wedge because of the steep rising bottom.

The potential wedge is still 100 points wide and would take about another month and a half to reach a point of forcing a resolution.

Again.. interesting timing.. plenty of time for a christmas rally and January is a popular time to kick off sell offs.

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One last interesting note.. (I can post charts showing this on Thursday)

1) We are just underneath the mid-bollingers on the Monthlies.. the same was the case in May 2008 just before the market dived.

2) We are smacking the top of the bollingers on the weeklies.. again, the same was the case in May 2008 just before the market dived.

A lot of very intersting similarties between the 2 tops and following moves. But we'll get into that deeper maybe as a christmas vacation special post.

GL

CJ

12.05.2011 -- Interesting timing..

very interesting timing for S&P to put Europe on credit watch negative. Just as we were taking out the 200dma, S&P shows up with the news and causes us to reject it and sell off.

did we sell off because of the S&P news or simply because we rejected the 200dma? Classic argument.

considering S&P's history, I'm forced to wonder why the powers that be decided today was a good time to release the news on the verge of a break above the moving averages.

I'm forced to believe that Ben maybe knows he cannot let this market break higher as he knows he must continue printing in support of both the US credit market and Europe and he cannot be constrained from doing so because he is confronted with a surging bubble market and inflation.

but that's just tin foil consipracy stuff right?

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Key Levels

Upside -- 1265, 1300

Downside -- 1244, 1212, 1205, 1173, 1168

(been doing this blog 5 days a week for over a year now.. one consistent pattern has been when the Upside/Downside # of key levels gets lopsided, it almost always means a reversal is near. Not sure if anyone else has paid enough attention to notice this.. i only did because I write them every night... worth watching)

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SPX Daily;

There is our corrective channel. The picture has cleared up quite a bit overall. Usually the "clearing of the picture" is a bad sign for us technicians and especially Elliott Wavers. Clear pictures are often rendered cloudy.

The clear picture here is that we have a 5 wave down bottom at 1075. We appear to be in an ABC corrective, A and B are finished at 1293 for A and 1155 for B. We are currently in C.. now we have 5 waves.. so we either finished C or we finished 1 of C. I personally think we just finished 1 of C and are about to correct this severe rally and then finish up this patter for the rest of the month. However, if we are done with C, its a failed C as it did not reach a new high and we are about to tank severely. I just don't see that happening in front of Christmas. But all that is part of our "pretty picture" here. Nice and clear with timing and all.

I dont like nice and clear, it always makes me nervous when things look like a lock.

I outlined in Green where I think we'll go for Wave 2 and 3 of C. I don't know if we'll finish 4 and 5 of C at the end of the Month or in early January.

This ABC is a violent pattern.. typical of a bear market correction. Massive swings in both directions... swings that normally are moves the market takes an entire year to do and you get equivilent moves twice in 2 months.

Slow Grinding = bull
Violent in both directions = bear

There is no escape for the world from this mess.. there are only 2 solutions..

1) massive printing and massive resulting global inflation
2) massive defaults of sovereign debt globally (Europe, US, UK, Japan, + many smaller independent countries)

Neither of these options have good outcomes economically for the worlds industrialized nations. Massive inflation or massive deflation. One risks loss of confidence in the worlds fiat currencies the other cripples the worlds credit markets.. both risk systemic break down of global financial systems.

Fools.. the inability to acknowledge and fix this 30 years ago has turned a firecrakcer into a global nuclear bomb.

GL

CJ