Technical comments on the S&P 500 daily chart as analysts issue warnings

Since we've been hearing another round of warnings, let's do a quick rundown of those and take a technical look at the S&P 500 daily chart below. One, Steve Puetz of Unified Cycle Theory has issued a newsletter update reviewing equities with a cycle topping date around November 18 which so far has applied for SPX and most indices, though the Dow poked a new high yesterday), and warning that the markets are likely to drop between now and late March 2010. I might note that would fit with that Bradley model chart produced by Manfred Zimmel at his Amanita site - not sure what it signifies for the time from now into January but definitely he showed a sharp drop during the early 2010 time period. I've also been pointed to Prechter's Interim Report out yesterday to sell or go aggressively short. That's Elliott Wave work posted at EWI so I don't want to give out Prechter's work as such; if you followed the info that was at Planet Yelnick I posted the link for at UBTNB3 blog last week, you know what it's about. He does show a double zigzag similar to Tony Caldaro's, with the symmetry level reached yesterday in the Dow at 10,495. It's a combination of the Dow reaching the 50% level, and the bear market downtrend line on the weekly and monthly charts. These are widely known and watched levels among technicians right now. Prechter also makes an interesting argument about time and price, very like the Gann analysis of Andy Askey that I posted links to here over last weekend (use Gann label or look at Andy's PTV-Investing blog).

Mark Hulbert also posted an article at MarketWatch on November 20 saying gold bugs are too bullish and contrarians should get ready to sell it. That's another concerning development for equities.

Below is the SPX daily chart. You can see the indicators did turn positive as the index moved off the last low. The $BDI also led up, but looks rolling over again. From the Fibonacci perspective, we wonder if it will tag its own 50% retrace at 1122, or will Tony's 1107 pivot keep it confined from rising over 1112. The other indicators had edged positive and depending on your trading timeframe and style, you either speculate that they're ready to roll over too, or you're looking for confirmation. That happens when they go negative, such as the OBV moving under its 30-day moving average. The DMI-ADX moves slower, but the CCI and RSI are faster (depending especially what time period you select for it - nimble players often enjoy a 5-day RSI, often with other timing indicators like 15-minute and hourly RSI's and exponential moving averages). The CCI and RSI can be ready to roll over. Unless Terry Laundry is right about his new T, but even he cautions against buying in right now and to look for a confirmation first, then pullback. A pullback without a confirmation would be bearish. By confirmation, Terry is looking for his advance/decline indicator plus oscillator to agree on a breakout - so far that hasn't happened.

What's a trader to do? Myself, I did some selling yesterday with the indicated cyclic high and given the other analysts' warnings with the Fibs and technicals, I'll be glad to hang with that looking for another 5-wave down. I may TMAR a bit this afternoon to return some to cash, maybe play for a bounce later this week with some of the portfolio. It's too soon for many position investors to bet big without confirmation, but if you can feel comfortable with using yesterday's highs as a stop then it can be one way. Risk for that is if we see a diagonal wedge chopping at that, so another way is to keep approaching as a one-day-at-a-time business until we get confirmation of either the trend reversal or of a breakout. As always, we'll be careful out there - happy market navigating!