our S&P post last week of parts I-V spelled out the overall look and feel for the S&P as we approached and eclipsed new highs … we took a look at technology, financials and energy. additionally, throughout the past weeks, we have walked thru the circle of life for fixed income, the dollar and certain commodities. Additionally, we looked – globally – at the current state of affairs for the other equity indexes. this blog post will be a quick update to where I “think” we are and some key levels to watch over the next week …
- Financials: a pattern did complete at the high for XLF at 20.92. Higher targets also remain from 21.50-22.20. Would really like those “higher” targets to be attacked to get a true feel of the market but, for now, realize 20.92 could be it on the financials. if this is complete, then it does not spell “good” for the overall index.
- Energy: as we showed in the last post a potential terminal target remains higher in around 97 on the XLE. However, we also showed at pattern completing in/around 85.20. that has hit and a break below 80 (weekly close below) would not spell “good” for the overall index. Crude sold off on Friday and the real test will be it’s “return to the top of the triangle trendline” to see if it bounces for the higher target shown in the past. the $XOI and $OSX are also showing weakness at targets described in the past.
- Technology: I am breaking down the overall technology look into the NASDAQ index (NAZZIE). if you look back at the “technology” post from last weekend you’ll see that we still have some higher targets 30+ points away. Too early to tell if Friday was a high but would, again, certainly like the upper targets to get hit and for all three of the major components of the S&P to go down together.
- I still feel that the “big guys” are going to “tip” their hand and “try” to rotate out of the high flyers and into the staples (deodorant, tooth paste, water, etc.). I am watching this ratio like a hawk. This is a perfect set-up for a BUY of the ratio which sets up a (HISTORICALLY) SELL on the S&P. That target is a little lower and, again, would really like to see that level hit/targeted.
- Last, I had the WONDERFUL chance to train w/ Joe Dinnapoli of http://www.fibtrader.com a couple years ago. Wonderful training and very very important information on the “internals” of the market and it’s structure and the importance of liquidity in the world of program trading, micro trading, the bid-ask and the false injections of cash that has occurred w/in the house of cards this market has produced. Take the time to watch this series of videos: http://www.youtube.com/watch?v=MQed-Aqay5w I also ask you to take a look at the picture/explanation in part 2 of 5 and in/around 10:38 and 13:01 for part 4 of 5. The series is a couple years old, but still so extremely valid and important. If you read my post a couple hours prior to the FED announcement you’ll find that I correctly surmised that the QE would continue … believe it or not, sooner or later, the illiquid nature of todays market will, ultimately, put us at risk for a potentially major move. This is ONLY a probability and one that has, more than likely, a low chance of ever happening. But education around potentialities isn’t so bad, is it?
I AM NOT DESIRING OR CALLING FOR A CRASH OR ANYTHING LIKE THAT …however, the market has been propped up by trillions of dollars and, therefore, liquidity is an issue. If this is an issue then why not put some of the profits in the bank and let some or a little ride?
What if this DJIA chart is correct …. ?