Wednesday, December 07, 2005

High level consolidation over ?

Based on how the e-wave pattern is emerging, it's looking more like a high level consolidation rather than a topping process here. Here's some interesting Fibo relationships

The first leg wave A on ES (1272.50 - 1250.50) = 22 points.
Irregular Wave B (1250.50 - 1274.50) = 24 points.
Wave C (1274.50 - ??) = 22 points

?? = 1252.50, which would make wave A = wave C

The whole structure here looks more like a irregular flat which should end tommorow at 1252.50, which will also fill the last thursday's gap-up. Then a run to new highs around SPX 1285-90.

If 1250.5 gets taken out, then it could turn out be an expanded flat correction with a target of 1245. If we break below 1242.5 on ES, then something more bearish is in works and we might have seen an important intermediate top.

Anyway bottom piciking is always dangerous. So it's better to wait for a 30-min or a hourly buy signal and get aboard the train. If one were to bottom pick here, the safest instrument would be options and definetly not futures.

SPX - Right on the channel support

As i said yesterday, if ES takes out 1268, then we should make nominal new highs. We did make nominal new highs which ended in a sharp reversal. The inter-market divergences were telling a story for those who wanted to listen. NDX and SPX made nominal new highs while, the DOW coudn't. SPX has still not issued a hourly sell, although it's on a 30-min sell. If 1263 (channel support) gets taken out on the ES, there could be some serious selling. For now 1263 is the key. If it's taken out, my strategy would be to short the bounces.

Tuesday, December 06, 2005

SPX Daily - 12/6/05

The message boards on the web are humming with the talk of DOW 12000, 14000 etc. There's this elusive last leg up left and it's year ending with 5. There are well intentioned advise from bulls, as to why it's not worth being short here even for a very short term trade. This kind of sentiment is what intermediate tops are made of. While a last furious leg of rally cannot be ruled out, we have to work with what the hourly and daily momentum are saying at this point.

The daily is close to a sell, but not confirmed. The hourly was on a sell on all the indices - NDX, DOW and SPX at yesterday's close. With the gap-up work, they have managed to move the SPX hourly to a buy, but the DOW still remains on a sell. Still short from 1267 on the Dec ES. If we take out 1268.25 on the Dec ES, i will stand aside. If we take out 1268.25, then we could see a double top at 1273 or slightly higher highs.