The weeks has started with a pullback, which is a positive sign in my opinion, as this will help to fuel further rise in the days to come. Currently SPX is sitting at 1090-1095 area, which is a pretty solid support. If the level holds I am looking for 1110-1115 as first target and 1130 as the second target.
In case we don’t hold the support at 1090, this might be a sign of more downside to come near term. Targets on the downside are 1030-1010.
Looking for this reversal to be stalled somewhere between 1101 and 1105. Then expecting a pullback, where I would be lookiing for entering longs. The ideal area would be ~1095. Target for the next leg up would be 1118-1120.
Ultimate target would be 1130, which is a exactly 25 pts. from the 1105 resistance area.
Some things to watch out:
After a 70 pts. pullback it looks like the SPX index is ready to take a break.
1085 is acting as a strong support and I would be looking for a rebound to at least 1113 in the next several days. The game plan is following – we might go to 1105 from here, then a pullback to 1100 area, and the another leg up to 1113 area.
Currencies also support this theory, with the EUR/USD unwilling to go lower and 1.40 acting as a very strong support. Looking for a pullback to 1.43 in this pair.
My only concern here, is that indicators don’t support my theory of a coming rebound – both Stochastic and MACD show no signs of any divergence whatsoever.
It looks like, we’ve stuck in another range, as it was in November – mid December. Only this time it’s only 20 pts. wide. In fact the volatility has dropped so much in the past several months, that most traders, who were used to turbulent 2008-2009, are finding it difficult right now.
Still, there is plenty of opportunities out there, especially among individual stocks. I will post a list of most interesting ones later this week.
As for now, here is my view on the market. It looks like the market is straggling to make new highs, every 20-30 point move is met with the 20 point sell off. Though, we haven’t sold off yet. This makes me thinking, that we won’t, at least in the near term. Someone wants it to hold, and every pullback of 20-30 points is bought back. Also, all major resistance lines have been broken, opening more room to the upside. This are all indicators that we are going higher longer term.
The general rule is, that after a strong up day, similar to the one we saw yesterday, there is usually a continuation rally the following day. So, Right now, 1140-1142 offers a nice support level. Buying here with the 5 pt. stop is a good R/R trade. My target would be at ~1210. If a breakdown below 1128 occurs, I would have to change my view on the future direction.
As always, we need to remain cautios, as at this point relentless buying is just not worth. As the indexes don’t offer much of reward right now, it may be usefull to turn your attention to individual stocks.
The current price action is inline with my expectations. The projection about Financials turned out to be spot on, with the general market rallying “only” 1,60%, while the XLF index has gained more than 2,00%. So, we can say that the banks are pushing the market higher.
I have no idea of how long this party will be going, so I am placing my bets accordingly. Looking to short SPX futures near the 1135 area or on a breakdown below 1130 (see the chart below). Looking to add on the way down, otherwise will close for a loss.
SPX is continuing forming its rising wedge. To say fair enough, the chances of the sudden rise and the sudden fall are equal. For now I’ll stick with my view of a sudden collapse and will be looking to place short bets at a 1125 – 1135 area (see the chart below). There is also a possible Wyckoff Formation in the making.
GOLD also indicates, that the current rise might be done. See the resisting trend lines above? So, if you are into gold trading, I would suggest to short at 1122-1130.
PS. GOLD and SPX are trading at exactly the same level right now.
This is the last post for the year. The price action for the last month indicates, that equities and currencies are not moving in the tandem as they used to. Despite the rise in the USD, equities were able to add more to their gains. So, my target of 1130-1140 has been reached. Now I am at the crossroads, as some indicators are pointing to a pullback in January, while others for a more run and bump price action to come.
The above chart of SPX indicates, that the rising trend we have witnessed since March, is losing its pace. The only thing that might help this thing to go higher is a violent buying, as one we’ve seen in July. Right now, nothing suggests that this is going to happen, in fact the there are good chances that we might see 1080 by the end of January. Using Wyckoff Schematics, I have 1030 as my second target. This is nothing outrageous, as 9-10% pull back would be healthy for this market. Though there are some things that suggest, that bull is not dead yet.
The first bullish indicator is XLF. Financials have been lagging during the latest rally but the chart below indicates that they have finally found solid support and have a good chance of rising as high as 15.50-15.75. This is actually a pretty save play, as you can buy at 14.40-14.50 and place a stop below 14.20, giving you a nice R/R.
It may sound odd though, but XLF is also the sector that may trigger the reversal of the broader market. In this case we need to watch 14.40-14.00 area losely, as a drop below 14.00 might lead to a sharp selloff.
Other indicators of the reversal are GOLD and EUR/USD.
To support the bear’s case, EUR/USD must stay below 1.4480-1.45. To get more confirmation, I would like to see 1.4070-1.4050 by mid January.
The same thing is about GOLD price action, as long as it is below 1110-1115 price tag.
So, all in all this makes me a cautious bear, as the chances of another run and bump action in SPX are strong. Who knows, maybe the big layers, have dumped EURs, just to accelerate the rise in equities later? I don’t know that, so as a trader the safest option is to trade what I see… But HEY, enough of this, there will be a lot of trading days going forward, as for now:
For the past month, we have been trading in a tight 30 pts. range in the SPX, while getting a pretty violent reversal in EUR/USD. This is the clear indication, that some sort of pullback is looming in the S&P 500 index. I personally still tend to believe, that there will be one last rise to the 1130-1140 area followed by the sharp reversal in the mid January.
As for the next week, I am looking for longs. The sharp sell off in the EUR is also indicates a high possibility of a rebound. My target on the pair would be ~1.47.
Also GOLD may have also finally found support at 1090-1100 with a strong positive divergence in MACD and a double bottom pattern on a 30-min. chart. This is a pretty safe play, with the target 1150-1160 and a stop loss of 10-15 pts.
The latest whipsaw price action has caught many traders off guard. This indicates that the distribution is going in full scale. The question is, how big are the positions, the big IB have to unload. In case, the positions are very big, they would need more players to unload to. And the only way to involve more players is to make another squeeze to the upside.
Even though, the price indicates, that the top might be in, MACD and Volume are saying we might have another push higher. Also we need to factor in Seasonal factors and continued EUR/USD weakness.
So, right now, I would be looking for the last push lower to the 1095-1100 level to close the gap. This is a good area to start accumulating longs (Divergence and Classical Patterns might help to chose the right entry point). From there on, I would be looking to a traditional yer-end rally to 1140-1150 area.
Here is a little doom and gloom for you. The more I think about recent market situation, the more I read about it, the more I am convinced that there are much bigger things to come.
The bear markets can’t drop straightforward for several years, they need time and fresh money to be sucked in and fuel the drop. This new money usually enter the market when it is more or less calm. In current situation it looks like the calm before the storm.
Unfortunately, as traders we can’t do much about this. But we can be ready and adopt to changing conditions.
Take a look at this 75 years old chart. Don’t think it will drop thus far, but 500 in SPX might be on the hands.
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