Friday, December 31, 2010

Happy New Year!

There is a pretty good argument that we have the completion of the move up that has taken place over the last 6 mo.s.
Active contract Daily
click to enlarge
Note the 14 Day RSI is exhibiting negative divergence, and the MACD rolling/crossing down.
 The structure up can be counted as 5 waves. The "e" = .46 of the "c", the "c" = 1.5 of the "a", and the "e" = .39 of "a" thru "c".
Even if you are viewing the last 6 mo.s up as  the beginning of a longer term upward structure that makes significant new highs, this is looking like a place to take profits with serious risk of a major pullback, ie a 50% retrace of the last six mo.s, or 125 points.

There is a tremendous amount of complacency out there..note the VIX 
click to enlarge
Readings below 17 mark the beginning of major moves down ,  and there is a very high risk of that being true again. No matter what the Fed does. This argues for more than  merely a corrective retrace of the last 6 mo.s.
 Weekly
 click to enlarge
Again note the 14 Week RSI negative divergence vs the April 2010 high.
Frankly this structure up from the lows has presented a lot of analytical challenges since Sept. of 2009. One of the featured characteristics since then has been overlaps of previous high or low points, some ( and perhaps increasing)  follow through, and then a reversal, carving out an expanding triangle type of formation.

So while the SP might not crater from here to new lows under 666, a move to new lows under 1000 would be a continuation of the last 16 months pattern.














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