You probably know that the FED is planning on eliminating the market's crack via the taper. You probably know about the record setting margin debt that is much like the huge margin debt that was present before the markets tanked in 2000 & 2007. You've probably seen the DOW chart from the 1929 crash that overlays perfectly with the current DOW chart. You probably know that earnings warnings are at record highs. You've probably heard the superstition that each time since 1999 when a movie has been released about Wall Street that the market tanks. You probably know that the RSI's on the weekly and monthly charts for all the majors reached levels in December that haven't been seen since just before the major market corrections of 2000 and 2007. If you've been watching the $VIX chart that I use, then you know that when the 5EMA on that chart drops down near 12.5 then you have to be on the look out for some kind of negative market reaction to that. You probably know all that, but what you may not know is that the $TRIN has closed above 1.00 for 13 out of the last 17 sessions, the longest run I've ever seen. More importantly, 5 of those sessions were green days and this indicates true stealth distribution. Another thing you may not know is that the large commercial traders in the S&P 500 futures went bearish on the market about two weeks ago. And one thing that no one knows is which way the markets go from here. How all this is going to play out, I don't know but, based on what's happening in the futures markets at around 6:30 A.M., ET, on 1/24/2014, I think we're going to find out soon.
We've been in this large consolidation pattern for a month and this area is going to define this market for several months going forward. This huge area is either going to turn out to be a major support zone or a major resistance zone, with emphasis on MAJOR. If the futures don't turn around and head north at sometime between now and the close of trading on this Friday, then we are headed below the intermediate support level at 1818. If we should close below that level today, then 1811 may come into play on Monday, and if 1811 does not hold, then this market is in trouble. But here's the deal: often times the first break of any trend or consolidation is a false break and needs to be confirmed. There are several ways to do this. You can watch for two closes below the range or, the more conservative approach would be to wait for a move 3% below the consolidation zone. That 3% drop would take $SPX down close to 1750. If I were long, I wouldn't want to give the $SPX that much room, but I'm not long anything but gold right now. My thinking is that if we drop below 1811 on a closing basis, and regardless of any bounce that might follow, then the voodoo round number of $SPX 1800 will surely come into play. We take that out and close below 1800 for a couple of days and we probably are headed to $SPX 1750 +/-. Interesting thing about that is that the mid-line of the long term $SPX monthly chart is right at 1750. But I'm way ahead of myself so let's see how it goes over the next few days.
GL
We've been in this large consolidation pattern for a month and this area is going to define this market for several months going forward. This huge area is either going to turn out to be a major support zone or a major resistance zone, with emphasis on MAJOR. If the futures don't turn around and head north at sometime between now and the close of trading on this Friday, then we are headed below the intermediate support level at 1818. If we should close below that level today, then 1811 may come into play on Monday, and if 1811 does not hold, then this market is in trouble. But here's the deal: often times the first break of any trend or consolidation is a false break and needs to be confirmed. There are several ways to do this. You can watch for two closes below the range or, the more conservative approach would be to wait for a move 3% below the consolidation zone. That 3% drop would take $SPX down close to 1750. If I were long, I wouldn't want to give the $SPX that much room, but I'm not long anything but gold right now. My thinking is that if we drop below 1811 on a closing basis, and regardless of any bounce that might follow, then the voodoo round number of $SPX 1800 will surely come into play. We take that out and close below 1800 for a couple of days and we probably are headed to $SPX 1750 +/-. Interesting thing about that is that the mid-line of the long term $SPX monthly chart is right at 1750. But I'm way ahead of myself so let's see how it goes over the next few days.
GL