My last post was about a sucker rally on 28th November, a post I did through my iPad.
Since then, I had been really bogged down with work and other things in life that the little time I had reading news and watching through my mobile devices all did not seem to make much sense. Hence, I abstained... from taking any positions.
A quick review... since my last post, major events include the central banks easing the swap rates, and the Euro Summit. The former fired off a very strong rally but it fizzled as people started to realize that it was a bleed to let off some pressure. This means that there is more time added, hence kicking the can further down the road. While that happened, the bond yields of the European sovereigns actually receded enough to ease tensions, giving the central bank measures some punch for its efforts.
Then there was optimism fuel from the Euro Summit anticipation, as well some seemingly decent economic data out of the US.
Despite the above, the market rallies were short and stunted. A look at the charts reveal the behaviour and psychology of the current market.
Below is a snapshot of what I saw today... click on image to get a larger view.
The ES weekly chart (left panel) appears to be forming a HUGE bear flag, which suggest a deeper downside going forward into 2012. While this is may include some upside as the turn of the year, for now, looks like Santa may have crashed en route to the rally party IMHO...
The daily chart (middle panel) has some very omnious technical aspects. Notice the while downtrending line from August 2011? That trendline has been tested and failed five times. For technical chartists, this is significant as the more times the trendline is tested and failed, the stronger that trendline becomes. Furthermore, see the dark green 200MA line, which has been tested and failed three times in the past two months. Although there has not (YET!) been a Sell signal, there may be one coming along soon if Santa does not rally the market. The dismal outcome of the Euro Summit and developments over the past months in Europe is certainly showing a trend... that hopeful promises will be made, and will yet to be delivered, if at all. These promises will result in powerful bear rallies. In any case, the red arrows outline my baseline expectations in the near term, where the S&P futures should break 1220 and then test 1200. A breakdown of 1200 this time would be really bad. Before this happens, I am expecting a Sell signal in the coming week, barring no new jolting developments from European leaders (which I suspect is unlikely). I am actually looking for the end of the review period of the rating agencies to help in downgrading the sovereigns (and tank the markets).
In the 30 min charts (right panel), it is clear that there is a current downtrend... this would be the first to change if there is a reversal rally, so it is worth keeping an eye on it.
In other charts, not shown here today...
/DX, the USD futures is looking bullish.
/GC, the Gold futures is ranging in a large area and is looking bearish. So is silver. Same for copper.
/CL, the Crude futures, strangely appear bullish to me, and this does not fit into the overall scheme of things. I do wonder as I keep an eye out on crude.
Meanwhile... as US economic and employment data, together with Leading Economic Indicators (LEIs), are looking good for a mild US economic recovery. That is without a doubt. However, a European breakdown is more than enough to overwhelm all that good news and improvement. For now, it appears to be a bear market, and the bull really needs to work real hard in the weeks to come.
Be safe, be wise.
The MadScientist
14 December 2011
Note: ALL material posted here is from my personal opinion, and my opinion may differ or change without notice. These do NOT constitute as solicitation, investment nor financial advice. By reading the materials presented here, Readers acknowledge the awareness that the materials are intended for educational purposes only. For investment(s) advice, related decisions and/or actions pertaining to investments, always consult your own qualified financial advisors, brokers, etc.
Charts are from TD Ameritrade Thinkorswim platform
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