Thursday, October 27, 2011

sell the news

Here is a 10 point box, 1 box reversal point and figure chart of the December e-minis going back to the July high.

As you can see the market this week has broken above the top of a 10 week trading range. The question now is whether this portends a move to 1500 or whether instead it is a false breakout.

For the time being I am going with the false breakout scenario. The breakout has been accompanied by news of the temporary resolution of the European debt crisis, and in my experience it is better to sell bullish news than it is to buy it. I might also note that at this morning's high the cash S&P has just kissed its declining 200 day moving average. finally, as you can see on the chart, a point and figure count across the base area associated with the October 4 low shows a potential rally to 1280-90, not far from today's high in the ES so far of 1273.25.

If I am right about this action being a false, upside breakout then the e-minis will soon drop back below the top of this trading range which stands at 1230. This in turn would be the beginning of a move to 950 or so.

If instead the market starts to accept prices above 1230 as fair value over the next week or two I will have to reassess my longer term bearish scenario.


Edwin said...

The ugly housing news also serves to remind the bulls that a recession may be lurking.

Carl, excellent work! Bravos.

Nav said...

Learning from you,but I'm convinced for 1400-1450 by year end or January 2012.1020lowest scenario in S+P500.
It is my self based analysis,and will work with traders and few analysts over the week end based on our HUGE learning from you.
Thank You,Sir!

sandy allred said...

Agree with a sell here Carl. It could look very nasty in two weeks...

Edwin said...

I just realized that Japan added 5 trillion yen to their QE to compete with the European.

Global money printing press working OT = higher stocks and precious metals (PM) prices.

I just closed my eyes and 2X my PM holding.

May be 1500 is coming.

dave said...

Ganns favorite cycle was the 20 year. Some examples:

1982 low - 2002 low
1983 rally - 2003 rally
1987 top - 2007 top
1989 rally - 2009 rally etc etc...

20 year cycle is almost guaranteeing a strong rally into early 2012 as in 1992 but how we get there may not be a straight line.

In 1991 there was a December pothole...thats my best guess...December pothole in 2011 maybe back down to SPX 1220-30 then this 20 year rally resumes.

TeslaSignals said...

the house of doom is not valid theory ..
i think 1500 is coming our 401k accounts will double .. it is coming we are so happy ..Gov't will make all middle class rich so people can retire early... now 3.6% up with no stopping..

MaverickUK said...

Hi Carl
I refer you to my post on 22nd Sept which said the following:

"Hi Carl
In my article entitled "Stupid Politicians" dated 15th August 2011, which is published on my blog, I comment that there is absolutely no solution to this crisis. I've been saying this for a while, but finally the markets have caught up with reality.

The solution, in my opinion, was to never print money to solve a problem that was created by debt in the first place and to let the banks fail. All the governments did was focus on the short term and transfer the debt at the micro level to the macro (ie sovereign) level and now those sovereigns are collapsing in what will be a domino effect of unprecedented disaster. WW3 but on an economic scale most likely leading to a depression lasting for decades.

If history repeats itself we will most likely have a strong equity market rally until mid/ end of October before complete collapse in equity, commodity and bond markets etc across the world.

The direct link to this article is:

Stupid Politicans

Isaac Sarayiah"