Saturday, December 5, 2009

Weekend Analysis

Friday's reaction to the job report immediately reversed the losses in the futures and popped the SPX to a new high only to see sellers come in for what the 3rd time in 3 days to push price back into the consolidation range that we've been in for the last 19 trading days. Yes, that is how long it has been.

My primary wave b scenario from last night played out as the overnight futures pushed the SPX to ~1096 (my target was 1092-1095) before the job report came out. It was interesting to watch the USD strengthen while the SPX was pushing new highs. This eventually lead to yet another reversal and the SPX nearly touched 1096 again before moving up into the close.

The USD, however, did not reverse and stayed strong all day long nearly pushing as high as 75.94 before settling into 75.79 at the close. This looks like a clean break of the daily 34 SMA, and at worse should see a couple of days consolidation and best case should see instant follow through all week long to the upside taking out overhead resistance at 77.00. Should the SPX recorrelate with the USD, then we should see a massive move down starting on Monday, which is consistent with my primary count.

Another thing to look at is the market's previous 21 week cycle pivot chart. While the market appears to have broken the cycle this last timing window, but if we move to the downside, then that would be another confirmation as we are on 21 weeks now from the previous pivot low.

This chart is my primary scenario with ideal price action seeing an acceleration gap down on Monday and never looking back. My larger wave B scenario is still on the table (bulls holding 1050) zone, but I still like a primary wave 2 top here should the markets follow through on Monday to the downside. Closing the gap at 1058 should be sufficient to have a confirmed failed breakout and reverse the trend from up to down as many indices are already there if not on the edge.

Should the bulls actually gearing up for a true breakout, then we should see an acceleration gap to the upside at or above 1110 on Monday. Any gap up that reverses SHOULD see follow through to the downside.
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