Wednesday, November 30, 2011

SPX under 1257 remains in bear hands: Fibonacci & chart views

Three days of shooting star have followed seven days of falling knife! Last week, people were afraid to be long. Now they're afraid to be short. But our thesis remains that what the market does on Thursday, and maybe Friday, should be telling for the bigger picture. Let's take a look using two ways of seeing the S&P 500 ($SPX) chart.

First, the chart at right includes additional trendlines, both an uptrending channel and a downtrending "cap" on that channel which the $SPX butted up against today. The other chart below shows how the market is still under the 200-day MA, with the $SPX testing around the 61.8% retrace to 1292, i.e., around 1241. So if the $SPX noses under 1241, it may be an early clue that this bounce might be a second-wave type of pullback up, before rolling lower again.

I know this type of Elliott Wave counting doesn't synch up directly with Tony Caldaro's. But I'm looking at more than that. Aside from being suspicious because this is the common move up into new-month new money, the VIX (in a lower indicator window) dropped to its lower Bollinger Band; and the TRIN dropped extremely low. On the other hand, high volumes today can be a plus. So we must remain objective and let Ms. Market tell us where she wants to go - and go with her.

SPX 1257 remains vital, so if the market tries to rise more then look to see if 1257 holds on the upside. Otherwise, we'll keep our KI$$ perspective on the defensive side and look for another drop into next week or so before the late-December traditional "Santa rally".

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