S&P 500 - November 26, 2010

Are you gapped enough yet?

Chop-chop market was what we had for the week.

During the shortened Friday session, I said that S&P needed a move above 1195 to indicate potential for a positive posture and that as long as index stays below 1192, it had potential for more decline.

Well S&P stayed below 1192 and dropped a bit more. After the market closed, the futures took a high volume hit of some more points down


There was a last minute high-volume sell on SPY in the regular market as well


This is a very curious dump at the end of a rather slow week.

Whether there is something some people know or it was just a matter of trying to lighten risk/or establish a hedge lest the North Korean idiot gets himself into a real war, or something goes bad in Europe, or some banks fail in US, or the Chinese raise rates or margin requirements or whatever, we’ll only know on Monday – maybe Sunday evening session in the futures market.

As a side note, and FWIW, Monday is a double POMO day

2-4-1 POMO!

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This is a monthly


If you remember, after the top of summer 2009, I said that the rise from March 2009 low was a 4-way affair, and as such, it could be a wave 1, a wave A, or part of a larger upward correction. I argued that, if I were correct with my count, we would have another attempt at a high for at least a 7th wave. We are having that 7th wave. The move the low of summer 2009 is one wave the way we measure significant waves using OEW.

There is strong technical resistance from 1200 to 1250 and I suspect that this wave, if it has not topped already, will top somewhere in that 50-point range. The next significant wave down after this one is over will tell us if the preferred bullish count is correct or not.

This is a weekly



This was the 4th consecutive week that index close above 200 MA. It is still within the blue channel that I have had on the chart for weeks. These past two weeks, index has bounced from its 13 MA area. It basically has been going nowhere while RSI has been falling from oversold levels. It so far looks like consolidation. To an optimist, it may be a consolidation before the resumption of the run up. To a pessimist, it may be a pause before another leg down. I think, as long as index stays within 1175-1200-1225, it is either consolidating or advancing. That means that we can carry the current count that is looking for an end to an intermediate wave 4 leading to an intermediate wave 5 up.

For an existing position from lower levels (we started thinking about a tradable bottom around 1050), one only needs to do position management for size and for risk.

For a new long position, one needs to determine if the risk justifies the expected reward. If the answer is yes, then somewhere around support of 1175 may be the place to put a bet. If the answer is no, then one either stands aside or start looking for a place to perhaps short.

Further downside increases the risk of an OEW trend reversal. I cannot divulge the criteria for that but I will let you know when it happens.

This is a daily


It’s been walking a tight range near support – a rater precarious situation. The drop to the low of Nov 16 took RSI into oversold areas. But the attempts at a run after that were capped by RSI around the neutral area.

Notice the area between 13 and 34 MA. This is a contraction. If all that mattered in the world were technicals, I would say that the chances are for the contraction to act as a continuation pattern and expand downward. But technicals are not all that matter in the world. On November 18, I said that we had enough waves for an intermediate wave 4. Prior to that, on November 16, Intraday, the day market was plunging into its low (so far), I had said that if I had wanted to bet on the bulls’ side, I might have looked into some Dec or January calls with strike 120+. On November 18, Intraday, index was playing with 1200 area and I said that if I had those calls, I would look into either taking partial profit, or some sort of a spread, or both.

There are many ways of playing the short term of the market, and what I did Nov 16-18 is just one way. We assess the technicals, see if we are near an area of support/resistance, decide on some exit strategy, and, if feeling like it take a shot.

Short term adventures aside, not much has changed since November 16 to make me confident of the technical picture one way or the other.

We still have the possibility of Nov 16 low being the low of Intermediate 4. The chop-chop that has happened after it has cast a bit of doubt on that possibility, but the chop has evolved in a wave structure that would definitely rule one short term alternate or another.

This is a 60-min chart



The short term wave possibilities are plentiful. I have two of them on the chart, but there are so many of them possible. I shall keep that in mind next time a perma-waver attempts to push his/her count as if it were THE ONLY wave possibility.

We seem to have a short term range. A break of this range has theoretical targets of
Downside:
1st target 1150
2nd target 1125

Upside
1st target 1225
2nd target 1250

Notice that the upside targets coincide with levels of resistance that we see on weekly and monthly charts.

If I were a bull, I would want for the market to drop down from this range to a level that would not force a trend change, but get the sentiment, breadth and momentum down enough to set the foundation for a run up. It can happen, especially with all the bad news of recent days that may give us a push down) and market entering a seasonally favorable period as we enter December. The key is for the mid-term trend to hold on and not reverse.

As things stand now, S&P needs a move above 1195 to indicate a potential for a positive short term posture. A move above 1200 would further strengthen that possibility.

As longs as index stays above 1175 area, it may be chopping the range away.

If index cannot hold 1175 area, 1168, 1145 and 1136 are next OEW pivots we have. 1135-1150 is an area that I expect the bulls to seriously start defending the uptrend if the going gets rough into next week

OEW pivot support at 1187 and 1176. Pivot resistance at 1227 and 1240

Long term trend is up. Mid-term trend is up. Short term trend may have turned down (but note that if yesterday’s low holds, we will get a higher low)

Enjoy the Rest of Your Weekend!