Well Santa sure did take his time, I was expecting this rally a few days before it actually started, as the decline over the last week or so was very choppy, only it was talking its time and kicking off most that were trying to buy a low, when markets bleed like that, it makes it tough to hold on to a trade, as whilst you are trying to capture a low, you also must practice the correct money management skills.
ES
As the market rallied above the 1220ES that was our 1st sign the market shown some strength. (We were using the last swing high), that was as our key area, but it was showing sign of strength once it broke out from the trend channel and above 1208ES.
Once a strong push above 1220ES we knew then this was the real deal and time to once again switch bias as potentially a move to 1300-1320ES was on, as we have been using some ideas, 5 in fact, as the past 6 months neither side has the real edge, so regularly having to adjust our bias, this is the market you are dealing with atm.
Those that are fixated on some sort of crash are missing out on the potential for the markets to put in 50-100 point moves, to the upside, traders have been waiting for the "crash" for years, but likely broke now from all the selling against a near 3 year rally.
As the markets close for the Christmas holidays, the market is potentially setup for a move now towards 1300ES, but we do want to see some strong evidence, so far it's working well and I don't yet have a reason to think otherwise, but we don't want to see early weakness going into next week when the markets reopen.
Failure to see upside, we again have us back into the range we have been trading the past 6 months, but we have some key downside areas that if get broken, we have us switch to another idea.
At this present time the market is still in chop land, unless you have been living under a rock the past 6 months, the markets have simply done nothing but create wild swings for traders, whilst traders like us are loving the moves, as it creates chances, investors are getting pushed and pulled around viciously, this is not the time for complacency sooner or later one side is going to come out victorious.
It feels like we have to flip our bias virtually every week with the wild swings we are seeing, but that is what traders need to do in this market, this is what the markets do when you have a sideways market
SPX
With the strength shown the last few days, we are looking for that to continue and push higher into the new years and see our target between 1300-1320SPX, the minimum needed is a push above 1292SPX.
So with the low volume and the lack of traders around, we kind of like the upside potential for higher prices, where some serious choices will again need to be made, as the bears must show themselves to be the aggressors of this markets if the market gets to 1300-1320SPX, failure to reversal around that area will have the bears in trouble.
Now there is always the chance the market failed at the 200DMA as it barely broke above this week, however we will watch any decline to confirm if indeed it is a rejection.
There is a big difference between those that trade the markets and those that have a bias and refuse to change.
We do have another working idea of a triangle if the market fails a bit higher around 1275SPX area as it back tests the trend line so out of the ideas shown here, I kind of moved to the ideas 2 & 3 atm.
Ideas 1 & 4 are virtually dead, although I have not shown it here, we do have a bullish count, but it's really about if the market can find the strength here, hence we are watching the smaller time frames and building a picture upwards, as we are traders, we don't paint pictures and tell you the world is about to end, only to see the market rally for the past 2 years.
With the push above the 200DMA and trend line resistance, the bulls can run with the market here if they get a decent start early next week.
The RSI made a statement but pushing back above 50, that was an early sign in the week as well.
You can see how compressed the tape has become, with this move it could get legs as I am sure there is a ton of buy stops from the shorts just above this area, and the more they get triggered with low volume ramp the more this can push higher into the target band we would like to see. That's just a fact the way the markets work, you can use that to your advantage or get run over.
But we still need to see price action push on higher, as I am working an idea on the DOW that needs a bit higher and a great area to finish the rally from the Oct 4th lows.
DOW
In order to finish this count, it really needs to see a bit higher, as we would ideally see a back test of the trend line, that's the ideal spot for a reversal and a big move lower, but then the market should have the right sentiment by then as many will be thinking about breaking the 2011 highs.
As I previously mentioned there is a very bullish idea on the markets (not shown), but as we are stuck in this range, we have nothing to confirm either idea, hence we are trying to narrow down the time frame to trade the markets, and keep risk tight, 100 handle stops don't constitute low risk in my book.
Same idea as the SPX, with a potential to see 12800 if it really got aggressive, but as long as it don't fall back below our support areas, going into next week we do like the bullish side into the early part of the new year.
AAPL
I have wrote about AAPL many times in these pages, but I still do consider it a big part of my analysis, as the markets won't be crashing any time soon as long as AAPL stays above its 200DMA, when I mean crash, I simply mean a move that is the same as or worse than 2008, that's pretty much imo what the bears are expecting.
This maybe already in wave [5] and finished a triangle for wave [4], although because of the sideways nature of the move it may still morph into larger triangle, but as long as this holds the trend channel and 200DMA, the bears can forget about a crash, as until the big caps stocks roll over the market will hold firm as it has done, much to the disappointment of the shorts over the past 3 months.
We still do have an outstanding target of $430 on this stock, so whilst it moves sideways I will continue to think this has that target in sight, if it does see that final suspect move higher, we then start to look at opportunities to sell that stock, as I really do think it could be one of the trades in 2012. Timing is everything especially with the markets, get it right you can make decent money on this stock, get it wrong, and whilst you may indeed call the eventual direction right, if you lose $$ there is simply no point in being right is there?
Being early is still wrong in my book.
If you look around under the hood you can see some parts of the market still suggests a little more upside, it's one of the reasons I am not as aggressive as some technicians, as I see the potential for some sectors and some key stocks seeing a little more upside to complete some ideas.
That's the big difference between someone like myself that actually goes out of his way to fine tune the markets and not just slap a load of labels on a chart and says the market is going to crash.
When I see evidence to support the crash case, then I will suggest it, but from where I sit atm, I have a few more markets that really could do with some upside to align the markets that I follow.
Objective analysis is the big difference between those that stay on the right side of the tape and those that get run over as they remain stubborn on their bias.
Oil
Once of the reasons why I still consider stocks to need higher is oil, you can see how stocks and oil have tracked each other since 2003, and the decline into the last swing low on oil was 3 waves, so I suspect oil have some un-finished business on the upside, hence stocks are suggesting that we can see towards 1300-1320SPX on the SPX, Dow to 12600.
Conclusion
We continue to chop around in stocks over the past 6 months, nothing conclusively has been confirmed or negated, but we suspect the Santa rally, although late can see some more upside into the early part of the new year, only a break below some support areas would we consider the breakout a failure and then price will move back into the range we have been suck in for the past 6 months or so.
It's by no means an easy market, and I am sure its driving readers and other traders crazy with daily swings, but those swings are offering ideas and setups to the traders that are willing to follow the market and expect that until this rage is resolved, no one side owns this market as we have simply gone sideways for the best part of 6 months, but stuck in huge range.
Until next time.
Have a profitable week ahead.
