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I didn't post yesterday on Slope… but did put out a post on my site (here) that may have saved some bears today. Now we all know from yesterday's post how deadly the RSI can be, and that we should trust the RSI more than the price.
First let me show you the intraday I have been looking at for $VIX, $SPX, /ES, and $NYA.
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.
Just about the only television show I watch is "House", which has a nice cynical edge to it. I was shocked and disappointed on Sunday to witness within the program the most comically absurd product placement when, about a minute in the program, one of the doctors says to the other: "This neat curve control thing – – it automatically slows the car down when it senses I'm making a curve too fast."
And all during that ridiculous quote, there were cutaway shots to the rear and front of the car prominently showing the Ford and Explorer logos. It was about as subtle as a comment from The Hun.
Coincidentally, I happened to trip across this item from the 1960s showing, of all people, Ms. Jane from the Beverly Hillbillies sucking on a Camel cigarette and singing its praises. Disturbing on so many levels.
In the aftermath of the Fed-led USD injection into the global financial system earlier today, all eyes should be on spot gold prices because a world awash in liquidity just became more awash in liquidity. If nothing else this should drive more flight to safety flow into the precious metals as a hedge against either a forthcoming bout of serious inflation or failure of the central banks to stem an apparently exacerbated credit (deflationary) squeeze.
That shouldn't come as a huge surprise, since I was short. The good news is that the very thing that I've been griping about so much – – – my refusal to overly-expose myself in this market – – – is what is saving me today. I came into the day 70% in cash (the rest in small shorts), thus I am down 1.38% as of this writing, in the face of a Dow that has been up almost 500 points.
So, as bad days goes, this one is quite survivable.