Well, we're down to the last month of this mentally-challenged year of 2011, and November has closed with a bang. The nearly 500 point explosion on the Dow obfuscates the fact that, for the month, the Dow was up a whopping three-quarters of a single percent, and the Russell was down a ginormous half of one percent. In other words, once again, huge amounts of smoke, and absolutely no fire.
One reader asked me to show the ERY chart again, which has had an uncanny knack for spotting turns. I imagine if the market were left to its own devices, ERY would have traversed all the way back up to the upper trendline, but the massive central bank intervention short-circuited (again) this path, and we're approaching that lower line once again.
The most fascinating chart to me right now is that of the S&P e-mini, shown below. We have powered back three Fibonacci levels in just a few days, and we are mashed right up against the apex of that triangle. At these levels, a pause (or modest reversal) makes the most sense.
An element in the market's direction, of course, is the Euro (although not as much recently – – witness today's modest rise in the Euro compared to the fireworks show in equities). I look at this graph and continue to believe the two giant tops we saw in 2007/2008 and 2010 closely match a third top, formed this year. Breaking the most recent support trendline would at last pave the way for serious weakness in equities, but at this point, that's a pretty big "if".
What continues to be so frustrating about this market is that, in the end, it really isn't going anywhere. Take a look at the relatively volatile MidCap index over the past twelve months. It is pretty much unchanged, after twelve of the most volatile and news-packed months in market history. It's been up about 15% and down about 15%, but in the end…………nada.
We close with NQ, which continues to obey its diamond pattern very well. We remain beneath this pattern, and as with the ES, the breathtaking move over the past four trading sessions is due for a rest.