Friday, December 3, 2010

Longer term Market View

While the gang a MSNBC and other talking heads are giddy about the upsurge in the markets I sitll remain unimpressed.  Simply because the market is now within easy reach of 1234.93 on the S&P futures and that is the 61.8% retracement of the all time high to the bottom of the crash.  Why is this number important?  All I can say is I have seen more failures occur at that point than any other.  In fact I use that as an exit point on smaller moves most of the time and well, .. it works.

The chart shows the weekly ES and I include the snapback study which indicate 9 different stochastic studies of various lengths.  The long term is the blue line, then the red, green etc are shorter in length.  This gives a sort of dynamic look at what's happening strength wise.  The longer term study has moved from weak (below the green horizontal line) to strength (above the line) since September.  Now when the shorter term lines White, Magenta, Pink, yellow, move back and forth they form an oscillation of sorts and take on a wave like form.  This helps me make sense of the market as I tend to look at these things in cyclic form.  As the short term studies move down to the bottom, they will either drag the long with them indicating a firm move in the direction OR as in this case the short term will go to the bottom, leaving the blue, red, green at the top.  The short term lines then SNAP back up and join the long term creating a snapback up action.  This is what is going on right now and looks as though by completion we might just get to the 1234.93 level.  besides 1234 is a cool number.  Anyway a move into this area will meet strong resistance and about 75% of the time produce a failure and decent downside movement.  How much.  Well, who knows but I would think 100 ES points by the time this all plays out which will take at least 6-8 weeks I should think.

Again, if you make trade decisions based solely on this you are a fool and as usual do you own due diligence. It's just some guys blog but at least I'm not afraid to put it out and be wrong.  Even if it's more that 50% correct that's better than chance and certainly better than Cramer. LOL

75-80% of the trading going on now is machines from the big guys trying to screw each other so keep that in mind and don't get to feeling so good and smug about the little bounce here.  Currencies are driving this thing not value.  The values are already baked in the various companies and their stocks.  Good luck and be careful.

                                           Click on the chart to enlarge

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