Once the fiscal cliff solution occurs, probably this week, the markets may tip their hand. Note the buying volume interest for each of the five QE's. Also note how the volume decreases year after year showing less and less interest in this Fed-pumped market. The 10 and 12 MA's are important moving averages. The 12 MA is the 'Decider' which signals if markets are in a Cyclical Bull or Cyclical Bear (above the 12 MA is a cyclical bull market and below 12 MA is a cyclical bear market). The purple squares show how QE1 launched the cyclical bull in 2009, then trouble in 2010 which caused the Fed to announce QE2, then voila, happiness again with the SPX back above the 12 MA. Then trouble again as the August 2011 crash dropped price under the 12 MA signaling a cyclical bear market ahead. But Operation Twist and LTRO 1 and 2 saved the day in the Fall 2011 and created the rally in early 2012. Note the intramonth low that stabs under the 12 MA during the May selloff but the Fed saved the day with QE3 Infinity. Then that ran out of gas and once again the SPX fell into a cyclical bear signal but only intramonth during the November low--the Fed stepped in again with QE4 Infinity and Beyond to maintain the cyclical bull.
Last month's close was 1417-ish so watch this number closely in the coming days. The SPX will log a negative month if it falls under 1417. Of even more import is the 12 MA at 1386. This level is constantly monitored and listed on the Cyclical Turn page. If 1386 fails, it signals a cyclical bear market has begun and major trouble for equities markets ahead. Bulls are okay as long as they stay above 1386. Interestingly, the effects of QE are diminishing, so any trip south for the broad indexes may prove quite dramatic since the central bankers may be shooting blanks out of the money bazooka moving forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
KS, am I reading this correctly? Would you say the rising wedge is targeting just under 1050 for sometime around the 2nd quarter of 2013? (Happy Christmas.)
ReplyDeleteNope, the rising and falling wedges do not provide targets, such as descending and ascending triangle do. The rising wedge simply indicates the rally move is overdone and price is nearing a breakdown. Conversely, a falling wedge indicates that the selling in a stock or index is overdone to the downside and that a strong bounce move will likely result. But, you cannot project any price estimates from the wedge patterns. For lower price targets, simply use the horizontal SPX S/R levels listed on the weekends, or simply note the prior lows in the chart above and draw a line straight across to watch how price reacts at those levels. The 1140-ish and 1040-ish levels are important if the markets drop into a waterfall crash. The recent mid-November low at 1345-ish is important.
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