FOR WEDNESDAY: (12/28) The Brits and Canadians are back from Boxer Day on Wednesday so volume should increase a bit on Wednesday. The world seemed to survive terrorist threats over the weekend and that may still allow a last-week final bounce. Still may not get much of anything this week but year-end book-squaring and we’re starting to think a lot of sideways action going nowhere in all the markets until volume returns after vacation. We are inclined to expect end-of-the-week position squaring and then completions of key patterns in early January.
MARCH E-MINI S & P 500
TRADING RECOMMENDATION: Stand aside.
S&P ANALYSIS FOR WEDNESDAY: (12/28) Ten-point range on Tuesday didn’t tell us much. Tight ranges may suggest more day trading at the edges with resistance at 2270 with key support at 2255.50. Doubt that there’s enough news to create a breakdown. Ideal buy is closer to 2143-44 and if it came in at the end of the week on end-of-the-week selling, it might be easier to be long going into the first of the year when a spurt up to 2295 is more likely to happen.
Market has still done nothing but continue in a 4th-wave congestion pattern, and that will be the case unless 2040 comes out. That leaves two more new highs to 2295 and 2330 into the New Year. We’re still dealing with year-end profit-taking this week as the market has had a 250-point run-up since the election lows.
OVERALL: We do see 2295-2300 as the next pattern completion to the upside into early January and if we have a surprise pullback the market would have to take out 2240 to issue a sell signal. Any surprises and a break below 2240 might start leading to 2230 and then 2219.
BIG PICTURE: Patterns suggest two new highs to 2300 and 2330 into early January before we really have to worry about a 100-point pullback that may happen into the spring. Unless there’s something really wild coming, our focus for swing trades will be to buy a pullbacks.
WEEKLY CHART: Market has to hold 2240 and probably the market will not get close to that level. We still would expect new highs toward 2296 with additional resistance at 2330. It would seem that 5-wave up from the election low would be complete at 2330 and set up larger fall. Eventually we might get a 110-point correction from 2330 to 2220 and could take a few months which we need to confirm in the cycles. That means that much of the fun of the current rally will be over soon. Daily cash charts starting to project 2300 and weekly charts 2335. We have a bias for higher prices from FOMC into Dec. 22 but we’re not clear how long it will take to do the last push up to 2330. Could be as late as Jan. 7.
MONTHLY CHART PATTERNS: 2420 or 2520 isn’t out of the question before this bull market ends and it takes a long time to turn an ocean liner around in so V-tops and crashes are not to be looked for and publications that steer you that direction are being too sensational.
CYCLES OVERVIEW: Congestive profit-taking into Jan. 2.
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