The weekend markets are closed allowing for further SP500 trend and cycles analysis. I enjoy weekend financial analysis, in a calmer closed market period, allowing for reflection on the financial information in a logical concise manner.
Yet in the end, I do not have a great deal to add this weekend beyond what I stated last week. Overall, my trend and cycle forecast thus remains down in an Elliott Wave four scenario.
That stated, admittedly the SP500 index is now resting at a very interesting and important inflection point, as it heads into what could become a very volatile USA Thanksgiving holiday week.
We therefore caution to prepare yourself for some possible fake-out financial moves in either direction especially tomorrow and Tuesday morning. Given this possible confusion factor, today I will attempt to make clear - the truer market trend, by using some simple, yet powerful technical analysis rules and definitions.
Normally, the upcoming USA Thanksgiving Thursday holiday which is immediately followed by the first big Christmas shopping day known as black Friday, has a positive market bias.
Then, once this super-sale weekend shopping ends, financial analysts everywhere will decipher the weekend same store sales, to determine and forecast the full December 2010 shopping outlook, which needless to say is critical to many retailers hoping to boost annual sales and profit.
Yet, in a nutshell in 2010, even bigger events than normal and high volatility could commence during the upcoming week. Why?
Consider the ever looming economic uncertainty, the reluctance of the USA consumer to spend, the very high USA unemployment, and the ongoing global angst of the Bernanke save-the-USA-economy money printing, which so far has been completely ineffective and adds risk and tax liability.
From a more scientific and math perspective, if we look at recent technical charts and trading levels in the past few weeks, one pertinent technical analysis and math pattern now stick out as - most important.
The SP500 is currently sitting at effectively the psychological level of about 1200 points.
Using Fibonacci definitions in the shorter term, it now rests at the 50% retracement level - exactly between the recent high and low.
Essentially, the 1200 level is 27 points up to the former 2010 high (1227) as set in early November, and equally, it is also 27 points down to the recent low at 1173 made just last week in a sharp sell-off.
The question is now what?
The only way one makes a profit is to understand the current trend and go with it. This is why our blog title today of spot the trend is exceedingly important. Here is where a simple trend definition can become invaluable.
One of the more useful textbook definitions of a bullish trend is a series of higher-highs and higher-lows. Conversely, a bearish or down trend is a series of lower-highs and lower-lows.
For now, again the SP500 sits exactly in the middle of two very important support and resistance levels at 1173 and 1227.
The key question becomes; will it first take out the resistance high of 1227, to thus confirm a bullish uptrend, or alternatively, will it soon take-out the former support low at 1173?
In my own analysis, given the chance for early week pre-Thanksgiving holiday optimism, I would not be completely surprised to see the SP500 index open the week and trade modestly higher by even 7 - 15 points.
Yet frankly, a small rally or small sell-off in any direction is still generally meaningless.
The concept here is that we are attempting to confirm the trend direction by using key support and resistance levels. This means we must first bullishly take out the former record 2010 high (at 1227) or alternatively, break below the recent important low at 1173.
Later as our holiday week develops, volatility may pick up significantly, as global institutions begin to hedge their seasonal bets with either large buy or sell tickets.
By the way, although I cannot discuss all of our KRTT analysis tools for brevity and time, this higher volatility concept this week is also completely in line with our cycles and other technical tools forecast.
Some of these have been highlighted on the blog recently such as: Coming Fibonacci Event
For now, my bet is the recent SP 500 index low at the SP 500 1173 level is the likely candidate to be taken out first.
Remember, the very instant this 1173 level low is taken out this week or next, it would immediately confirm the down trend as in place by the definition of a series of lower lows and lower highs.
As always, there is never an absolute financial guarantee. After all, the financial markets are no longer freely traded.
Who knows if Bernanke, the FED, or the PPT will play scrooge in 2010, or alternatively, in another act of their money-printing desperation will come to the equity market rescue in possibly manufacturing the biggest ever Santa Claus rally.
There are two charts below with mark-up comments for your perusal. Enjoy.
Spot the trend.
Sincerely,
James Kelly Sr.,
Editor in Chief, BBTL Blog
www.KRTT.com
www.Facebook.com/KRTTcom
www.twitter.com/KRTTcom
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