Did a bunch of charting last night while watching the Cardinal throw down on the ACC Hokie. (Congratulations, enjoy it while it lasts cause Luck and Harbaugh will be gone in a flash.) All I found was wedge after wedge that appear to be overthrowing with divergences getting blown out (Q's here, INDU here, WLSH here and RUT here). Possibly the Q's will lead us south. It has all the characteristics of a blow off top. I think we're in a head of a larger HnS that appears to be worth about 90 points at this time which if topped here would target near 1090. That would be the best bear scenario of course.
Since there is this thing called the Fed controlling and manipulating the markets using POMO to pump shares to bubblish valuations you can't rely on traditional technical analysis as a guide post. What were waiting on is for the Fed to begin to pull liquidity. Just like the April top when the Fed experienced pulling the IV, the markets will plummet. The math at this time from the HnS is pretty close to the 220 point fall we had after April. You lose POMO and you lose the markets. We may have to wait for QEII to end and listen for the rhetoric about QEIII to get our clues.
The VIX (still busted) is diverging from SPX right now as it has set a higher low while the SPX continues to set higher highs. CPC is primed and ready. We just have to wait and be patient. right now the markets appear to be signaling that earnings season will disappoint. How could they not with where commodity prices higher than hell and a dead consumer in a country that is loosing 400k jobs per week with 43 MILLION on food stamps toating a debt load that the Fed can't even print off (I'll stop there and not mention the 1,000 other issues).
USB (30yr) is putting on the ultimate bear cross right now with the 50dma crossing the 200dma. The TNX has a bit more to run if technicals hold. FTSE has led the SPX in the last few major moves south and is falling again. A flattening yield curve will indicate a turn in the markets. that can not be ignored.
Oil is continuing it's ramp which is not good for the economy and the higher commod prices across the board will hit the markets hard sooner than later (I'll work in those charts today and UNG, gold and silver as well).
SPX Daily Indicator chart puts it all in one place. Looks like there is a bit of time left for the markets to run. Maybe we get a slight corrective as this wedge plays out and then a last churn to the 1283 level in February. My call from the 1140 lows has been spot on. Ramp to the QEII announcement, euphoric pop on the announcement, then drop then ramp to Christmas. Could not have been any better. That was the easy one. Now it gets tough as seasonality ends and the Fed's game takes away traditional tools used for predicting market actions. My only suggestion is to follow the fed's lead. At this time I have been speculating for some time February would be the month for the turn. I may need some help getting that call. Till then I can't get any more specific. Will wait for QEIII rhetoric to come, that will be very important.
Note - all the links are cause blogger will not let me post charts this morning.
Minis - LT channel off 667 lows. Price nearing the 50% diagonal that formerly (to April top) acted as support and since has been resistance.
GL and GB.
