Thursday, December 03, 2009


The e-minis have traded for three consecutive day sessions in a narrow, ten point range right at the top of an 9 month rally. Tomorrow the employment numbers will be released at 8:30 am.

I will tolerate a break to 1100 or so, but anything worse than that will mean that the market is probably headed down to 1040-1050. As long as 1100 holds I will continue to play for a move to 1130-40.


Kishore said...

Carl, the fact that we traded down, during RTH, through the Wednesday gap up, gives stronger support to the notion that we will be heading down further rather than a gap down open tomorrow morning, especially after two fakeouts, yesterday and today, at the top.

Nevertheless, a gap down is still possible for tomorrow and if it remains unbridged, the third island at the top will be in and we could then expect AT LEAST a 40-50 point selloff that you mentioned.

For sometime now, it may be too early for anyone to talk about the next leg up, to 1180 or whatever. Why bother, without first looking at the damage that the current down leg will do?

danielrange said...

In other words, it's going up unless it doesn't.

P said...

Pretty amazing that this post goes up at 3pm and at 3:40pm the ES did play to the doubt you had -- it dropped and dropped pretty hard.

Thanks for the updates. Your market direction updates not only help me follow you on ES/SPX, but I am trying to apply it to my other positions as well. Thanks again!


David said...

Something for you traders to think about. Most of you probably do not know what the commitment of traders report is. Here is the November report(summarized). Reportable positions(meaning,big well capitalized traders,the pros)held net short positions and increased their short exposure on balance. Non-reportable positions(meaning the little guy)held net long positions and increased his long exposure.Which side do you want to be on?

jeff said...

I think the short-term indicators say we only fall to 1070(unfilled gap) before making another stab at the 1120-1130 range. However, we continue to see fewer and fewer stocks have been participating in these rallies and we have declining volume in the process. Carl, I think you're familiar with this term...Hindenberg Effect.

For all of the bullish/bearish calls, the S&P is up 1% from the September highs. I'd say at best, we're stuck in the mud and going nowhere.

Perhaps this market is trying tell us something. And perhaps my recent Goldman Sachs posts have some validity to them that this bear market rally is over.

jeff said...

A couple other statistics:

1. the put/call ratios ended the day at 72%. In the past few years, we have seen four other readings under 80%. None resulted in a market that moved significantly higher. Specifically, December 21, 2007 saw a low reading on the index put/call ratio. The market rallied until right around Christmas, and that was it. After that, we didn’t see such a low reading until Feb. 5 of this year. The S&P was at 886 that day, and on its way to 666. We saw another super low reading (sub-80%) on Feb. 26. The S&P was at 752 then, so at that point the market was to fall by nearly another 100 points.

2. Just yesterday, the investors intellegence bearish ratio was 16.7%. In the past 20 years, there have only been handful of times this ratio fell below 20%. In June of 2003, we saw it get down to 16.4% and S&P 500 had gone sideways for the entire rest of that summer. In January 1992, ratio got down under 20%, and the market peaked; then, over the next few months, the S&P fell 6%.
In August 2007, the bearish reading fall under 20% again as the market was making highs.

I know Carl is very bullish, but I'm simply looking at my own contrarian indicators and history that says otherwise.


Kishore said...

Jeff, I you are absolutely right and thanks for providing the numbers and correlations with previous market moves.

Currently, there is very low percentage of bears among the market participants. The article that Carl referred to on the cover of Business Week pertained to predominant pessimistic sentiment about business and economy in general and not about the market. Majority of those pessimists about business and economy are not market participants.

In other words, the market is giving a clear sell signal for contrarians.

jeff said...

definitely no relationship between main st vs wall st.

however, Carl is the most bullish peerson's i've seen these days. even the bullish pundits like cramer who of late never have anything negative to say, still haven't mentioned the s&p will make new all-time highs. i'm cognizant that money managers have to keep up with the averages, but at some point, they have to protect profits.

i also recognize this is a free blog site and i appreciate carl's perspective, but he has yet to explain his calls for new S&P highs, yet, he is calling for oil to virtually crash from these levels. unless someone is in fantasy land, it's very obvious that the S&P and oil continue to trade in tandom. just look at the number of oil related stocks that comprise the S&P(i.e. Cabot Oil, Cons Energy, Halliburton, Massey Energy, Marathon Oil, Murphy Oil, Conoco Phillips, Schlumberger, Sempra Energy) also, oil and the Euro do have the same direct relationship given oil is a dollar denominated commodity.

under carl's predictions, we're about to see a complete divergence from this parallel, which i do not subscribe to

So here are the facts:
1. the euro goes up means the dollar goes down
2. oil goes up, the dollar goes down
3. oil goes up, the S&P goes up

Carl's predictions:

1. Oil is headed down to $50. If so, than by default, the dollar has to get stronger. A strong dollar means the Euro and the S&P have to go down.

Adsense said...

Hi Carl
Thought id make a comment
i have been looking for a cycle high in the market and i always leave myself open for what the market brings . my bias has been a cycle high coming into dec 18 21st
and possibly into mid feb or march
that said im now begining to see some longer term OVERSOLD readings
on several of my indicators which is begining to leave me with a few
conclusions . the major swings i have are march to aug next year .
the oversold readings this early imply a sideways trading range market over the next several months
most likely into mid feb mid march
and instead of a decline into august i would expect a rally into august , yet such a rally would prove to be a fake out , my guess is the late comers have noticed the cyclical lows over the past several years into march and will jump in expecting the big returns
of this yr to come again . how ever
mid august 2010 is a 2 yr cycle peak from which many steep declines come from , the year 2010
is a benner bussiness cycle peak and a low is due in 2011, using lindsays work and blending it with my own , id say may 2011-to as late as nov 2012 . this time based range is a combonation of many histyorical cycles in which major bull markets have come from .
bottom line im not so sure this market will decline in earnest from right here, shorter term a sideways move into dec 12th followed by a move to the upside into jan 15th fits the seasonals and the 2 yr cycle .
good luck

dcatlowpj said...

Interesting comments. The only difference between the commentators here and Carl is that Carl puts a timeframe along with his call on direction.

Everything is a guess. Jeff's final commentary made the most sense. It's just that I disagree with the idea that the Dollar always drives this or that, or that the Market drives the breaks and then other, if momentum is on the side of the Equity market, then the dollar slides....however, the Dollar is also traded. The Carry Trade market will drive the Dollar or other currencies despite the market.

Let's just be clear here: if there are world events that cause OIL to surge or DECLINE, then the currencies drive the action. If there are Fed or Government decisions made that affect the Dollar, then Oil may be affected.

If there were hard rules, then folks,there would be NO other side of these trades. Buyers are buying from sellers and the decisions made that drive the S&P are so numerous, so deep and complicated that no one can know for sure.

Yes, indeed, if we go up then we are not going down.

Danielrange said it: "In other words, it's going up unless it doesn't."

That made me LOL and realize that ALL we have is Price Action...PA tells all. There is no calling it in advance. If this were so, Carl would not be taking time aside to write books and a blog: he would be trading his philosophies and we would be reading about Carl being the richest man in the world next to Gates or some Saudi Prince.

Keep up the spirits. Learn to read Price Action and all will be well.

Rajath said...


yes, this is exactly my question too ... i had raised this query earlier this week but did not get any replies

i hope Carl shall address this :)

Kishore said...

Jeff, this morning the dollar jumped up and so did the ES Futures. What happened to the inverse relationship?

Anyways, personally, I think that the morning jump in the ES Futures is a great selling opportunity.