Monday, December 7, 2009

End of Year

Well, what a week we had last week. Nothing much has changed from a big picture perspective but we did see a significant move on EURUSD (the dollar).

As you can see we are still within the trendlines we have been using for the past few weeks and have broken important support. Not only did we break the 50dma (first close below trendline on friday) but we also gave up the important 1.48 and are slowly creeping back above it. We made a lower low today BUT MACD divergence (not shown) on the 60min is pointing to recovery higher (meaning weaker dollar).

Now equities wise, looking at the weekly chart we have continued to consistently make higher highs and everything appears to be bullish.

I had made a post on Friday about this topic and was quite active also on other blogs indicating that while this appears to be the best case for a pullback for the bears - we should not ignore the big picture. If this were any other months during the year I would be quite bearish in terms of positions I am looking for, but I have to admit its quite uncertain. On the daily we know it does not look that bullish after all - but consider this, the last time we were at important FIB level (38%) it took 3 weeks to break through, we are now at the 50% levels and have been operating in the same range for 4 weeks with the market making marginal new highs on a weekly basis.

This sideways action we have seen for the entire month of november and into december could be the consolidation needed to go higher. Take a look at when we first breached 1100, our indicators were quite overbought on the daily charts, looking at today, we have turned into a neutral zone even while making new highs and not selling off.

Please do not misunderstand my comments as bullish, its rather meant as a way to describe that one should remain neutral or "carefully bearish" until the market resolves itself.

Personally I believe when looking at charts we have 2 possibilities going into Jan-march time frame - a run towards 1200 SPX or the start of a larger pull back that should bring us into the 930 range by March 2010. I will post up more longer term charts this week to show the potential moves.

Currently we are still range bound between 1084 and now 1120. A very tight range and a breakout to either side should give a move of at least 20-30 SPX points.

Other then that - nothing much to say, its december and I would advise to stay in scalp and very short term mode unless you are invested outside of this range (short at the current top) or long at or below the 1084.

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