Monday, January 9, 2012

Stock Update

Click on Chart to Enlarge

In reference to a recent post on the possible pattern development here in the S&P 500, the expected logical confirmation is not so far occurring, suggesting that a downward pattern did NOT complete at the December low.  The expected logical confirmation would be that the advance to follow the end of the pattern would be larger and faster than any upward move within the pattern just completed.  That is what the blue boxes represent.  So unless the market rallies really hard into Wednesday, it seems most likely to me that either an upward pattern is still developing and may be near completion this week, OR there is still another downward leg to be expected in a 7 legged downward pattern since the July highs.

On another pattern note, since the time of the move up from the November low was equal to the time of the following pullback, if an upward ABC is forming, it would be expected to complete on Wednesday as the ideal time relation in this case is C = A + B.  This is also represented by the blue box times.

The Dow futures Commitment of Trader's data also has made a minor sell signal as the commercial "smart money" has largely moved toward the short side during the last 6 weeks of this rally.  This is significant because it is "real money" data that represents what the big money that drives market trends is doing.  In a downtrend environment such a signal will typically lead to a reversal pretty quickly, but it may possibly lead to a smaller pullback, and then a move to slight new highs with bearish divergence.

I suggest viewing the market as "neutral" here, with willingness to take daily time frame technical sell signals for short side trades.

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