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The SPX cash index formed a doji type candlestick this week. The close was about 1 point above the open. So it may be a spinning top which is less significant. However, given that it was an FOMC meeting week with obvious overbought conditions, I think it is more significant.
I have put a basic conventional Elliott Wave labeling on the chart. The reason this is important is that if the market does NOT break 2011's highs, the form of the pattern would imply a dramatic market swoon in coming months starting basically now. It is basically as far as it can go to hold this pattern view.
Of note is that the CoT data this week showed a large increase in selling in Nasdaq futures as it broke the 2011 high. So the implication is for either a top to be at hand very soon, or for a sustained short-covering rally that should push prices much higher. Don't try to guess. Let technical signal be the guide with appropriate stops.
There is a very tight harmonic resistance zone on the SPX right where it topped this week. Also there are time relations that suggest this move should end ASAP, IF..., it is still relating to recent prior moves on a pattern basis.
On another note, after the FOMC news came out that they pledged to keep interest rates low for an extended time, bonds initially spiked but then fell back. That would be taken to be a fundamentally bullish policy for bonds. HOWEVER, the market already anticipates and moves ahead of these policies. So, this could very well be a "sell the news" point in bonds where it sells off in coming weeks in response to the news. The technical picture certainly suggests that on both a short and long term basis.
I continue to look for a contrarian position here to sell the market. Part of my outlook for a continued expectation that the market is running on borrowed time is that oil appears to be in an EXTREMELY weak position, and gold looks by all measures to be topping on a counter trend rally an day now. Typically they have moved in unison inflationary/deflationary cycles.
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