Monday, 21 November 2011

Monday Musings

I like to ramble on a Monday morning. Rather than a long descriptive narrative, I thought I would jot down some of my thoughts as we start the week.

-This blog has been consistently bearish since the S&P500 and DOW hit their respective 200day moving averages. This trade has worked v.well thus far and I don't see any reason to change this stance from a bigger picture perspective. See: AND

-However, in the v.short term I see markets holding in and a potential long trade setting up. Volume has not picked up despite the breakdown, potential bullish divergences are forming and we are coming into a great zone of support in a few markets. Gap downs on Monday mornings often prove to be a good buying opportunity for the nimble.

-The key levels to watch are 1200 to 1210 S&P500 (Eminis 1205 last). Markets had a consolidation day on Friday and I see this move lower on Monday through consolidation as a potential final move lower. This area marks the 38.2 retrace, a potential A=C move, and previous breakout area.

(Update The Eminis are trading 1195 last. This is probably too low. Only a buy if price recaptures 1205/1210 when the Yankees get in. If not, keep focusing on that bigger picture bearish scenario.)

-The target for any long trade should be no more than 1225/1230. This market is only bullish if we can recapture 1250+

-The bigger picture is bearish. We have topping patterns across many markets in place; we have 5 wave impulsive moves off the top; and we have a confirmed DOW Theory Primary trend change to bearish. The bull market trend from the March 09 lows to the May 2011 highs lasted roughly 26 months. The sell off to the October lows was only 5 months and thus not even 20% of the time of the preceding bull market. We need a lot more time to consolidate and work off the previous bull trend excesses. I anticipate this bear phase to last at least 12 months.

-Any failure to bounce meaningfully out of here is bearish and confirms the above. The market failed from this exact zone in 2008. See below. It may not look impulsive of late but if this zone eventually goes, dont hang around.

-The DAX and EUROSTOXX have not made new lows of late. One could argue this is forming a bullish base pattern i.e cup and handle. If we see an upside breakout of this wedge/handle pattern, this could really change my big picture bearish stance. Counter this though with the Nasdaq which has triggered my Head and Shoulders top

-The ASX200 is trading at the low end of its range. The levels I am interested on the long side are 4150/55. Tuesdays are my reversal days and I will be looking for this tomorrow.

S&P500 Support Zone:

S&P500 Support Zone in 2008

S&P500 When support goes......