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I'd like to see the S&P get to 1120 and the Dow above 10,000. No, I'm serious. I think it would do all of us a lot of good. The snare drumming buzzing in the background and the sense of anticipation is all just a bit too much. And I think we've got a reasonable chance of getting there.
Let's start off with a look at the minute bar graph of the December 2009 /ES contract.
We see a number of things in the graph above:
The trend is up. Duh;
The really explosive rise lasted one month. That's where all the really easy money was made;
There have been three broad phases to this rally – explosive (1 month), medium (2 months), and grinding (2 months and counting);
Now let's hone in on what should have the bulls genuinely excited; the tightly-wound spring compressed between 1050 and 1070. If whatever the FOMC utters on Wednesday is agreeable to the market, this thing will bust out above 1070, and it will not look back.
It would actually make a fair bit of technical sense for the S&P to rally to 1120. As you can see in the graph below, the tinted area represents the 4.6% push higher it would take to get to this area, and it would mean the S&P (1) has reached its 50% retracement (2) is on the underside of a major fan line (the former fan line acted as a springboard for the failed H&S pattern, prompting the market to zoom higher starting early in July).
Well, what if the FOMC announcement comes out, and the market falls instead? (And by "falls", I don't mean a crash – – at this point, any sustained drop below even 1060 would be a pretty bad thing for the bulls, and below 1050 would be an Epic Fail).
In that instance, I think the rally will have exhausted itself, and the only fumes left to drive it will be the machinations of the investment banks who are gunning for their year-end (which completes in 6 trading days) bonuses.
It's no wonder the equity markets are relentlessly churning higher. This is the EUR/USD flipped upside-down. As you can see, there's no reason for the dollar to be finding any kind of a base (STU's sentiment indicators notwithstanding……………)
I've been mentioning lately how some folks are seeing inverted head and shoulders patterns where they don't exist. Well, there's one major ETF where it definitely does exist, and that's the ultra-bullish energy DIG. It hasn't broken out yet, but it's geting tantalizingly close.
The one curious aspect to this is that volume is steadily shriveling up (and, because the price has been so static, it isn't because the price has been getting out of reach for people).
I am concerned about what fun and games are left in store for us the rest of the month, particularly with the FOMC tomorrow, so I am going to populate one of my accounts with ten longs as a safety net.
All of them basically look like the graph below………
………and share these common properties:
Plenty of "open air" on the upside;
A nice relationship between volume and price;
A clean breakout above a consolidation zone
The specific stocks, and their stops, are below. These are not "lottery plays", but more run-of-the-mill long choices.
Sorry, everyone. I think my decision to swim laps at midnight last night may have been good for the brain and body, but not so good for me waking up early this morning. I'm off to a very late start…………I will do a post later this morning once my head is screwed on properly.