Wow what a market. It's like all the bears have been shot, hunted down by seal team XX! If anyone needs proof that the way to analyze the stock market is to solely 'follow the money' compared to traditional methods of studying the economy, employment, company fundamentals etc then the stock market performance of the last 6 weeks is it.
Late 2011 the ECB launched the LTRO program, the FED launched Operation Twist adding to the existing POMO schedule. For the newbie this is FREE cash to the banks in the billions so that the can play with as they see fit. All this money around, while most trading folk went on holiday and Fund Managers rolled back (as they do each December) NYSE shorts, the stock market was void of sellers, and the lonely well funded buyer pushed the market up an easy 20%. The low volume and low volatility is proof of that. If the Fed and the ECB planned this bullish ambush then mission accomplished. But the point remains WHY? Obviously a fall of 30% from 1400 is better the falling from 1100 on the SP500. Are they that smart?
So what happens when a catalyst eventuates for the bears to come back and play in a market that is void of sellers, rapid volatility that's what. Tale a look at the TVIX, see the volume build up, something going to pop soon.
Previous Post: SP500, monkeys are running the show In this post we expected a roll over at $129.50, what we didn't get right was the true meaning of the LTRO combined with Operation Twist. Too much juice in the market for price decreases on poor fundamental data (Earnings, Greece, etc). Guess that's what stops are for!
Lets review the Gann Angles on the SP500 etf SPY
Bullish Points:
- Price is charging up at 4 units of price to 1 unit of time (red 4x1), just like the other read lines.
- Gann rule of attempts at resistance, 3 failures is mostly succeeded by a 4th smashing through.
- This correction is a C of the ABC, the C is extending, and has much kung fu ( ie its strong).
Bearish Points
- SPY $137 is massive resistance
- C is the end of the ABC and they pull back hard.
- Price moving up the red 4x1 is running out of oxygen. (see Money Flow)
Money Flow: There is a slump in the Fed's POMO schedule in the next two weeks, and the Dec 2011 LTRO is near done (as far as we can tell) and the sell off in Apple Inc could fuel more profit taking in the general market. Our custom indicators from this post suggest that things happen at these high prices. The new LTRO package at the end of Jan 2012 is due, but not in the market yet.
News: Greece is in or out, deal on or off. Who knows.
We expect a correction in the purple box shown in the chart below, anything from 4% to 20%. The Trojans know that Greeks are tricky, so anything goes between now and end of March. Then there's the French election and how they will go. The credit market is not buying the bullishness in stocks, and credit market has always taken the idiot brother known as the stock market out to the wood shed for a knuckle dust up, yes we expect rough and tumble to follow !
