Hello Slopers,
I'm sure that most of you like myself have found this week to be frustrating at the least (YES! – Editor). My trading time frame is days to weeks, so in times like these after it becomes clear the market is content to consolidate and sit still for a little while (which isn't really surprising after last week's gains), I know it's time for me to kick back, watch less (we'll see how that goes), and just wait for a setup. I for one will be glad to see the market return to looking ahead more than 3 months at a time (or 3 weeks).
As we stand right now, I think the market is on hold until yet another European meeting has some conclusion. Given how European bonds have reacted, it seems the market is giving this dollar swap action some weight. I'm not an expert on economics or anything of the sort, I just watch charts and see how they react to world events. Speaking of, here are some key markets I watch daily.
It seems that everything is in some kind of limbo here. Risk assets like the USD, 10 and 20+yr bonds, and the VIX are all climbing, but in a weak fashion. Transports, Semis, and major commodities are all selling, but yet again, in a weak fashion. Weak trends indicate conflicting views or less participation. Judging by how these are all basically mirroring each other and given the potential of money printing in Europe, I think we're in for more of the same for a few more days at least. Here is an intraday 30min S&P500 chart.
It is not often that I ever draw a channel that looks like this, but after the strong advanced from last week (much the same as early October), the climb is so fast and relentless that I find drawing uptrend lines are useless as they don't line up well and breaks are basically meaningless as the advance just continues nearly immediately.
Anyways, this chart is illustrating my current bullish bias which will have to change if I see 1200 broken. In the meantime, however, there is a fair amount of support underneath current levels in the form of basically every moving average, ideally the 38.2% or 50% fibonacci retracements, the upper side of the downtrend line bordering the symmetrical triangle from November (blue downtrending), plus the lowest mirrored channel line. The only obstacles above are the 200MA, the underside of the lower symtri uptrend line (blue uptrending) and a downtrend line starting on July 7th and connecting to the Oct top (red line). If that is broken, you'd be hard pressed to make a good technical bear case in the intermediate-term. That said, this is also an ideal zone for a resumption of the bear trend (though given the panic sell on Thanksgiving week, I don't favor that option just yet).
Feel free to correct or educate me regarding this next part of speculation as I am by no means an expert on economics. Regarding the European summit Dec 9th, if the news is not economically friendly, surely we could see risk off trends strengthen and selling increase, but if QE Euro is approved (which Germany seems to oppose strongly), commodities should take off.
What I'm not sure about is how the Euro vs. USD will react. The USA's money printing caused dollar devaluation which alternately appreciated the Euro, but if Europe engages in money printing, from my understanding the Euro should depreciate, thus affecting USD appreciation. Normally, a stronger dollar would weaken commodities, but if Euros are being hedged with USD's and commodities, we could certainly see the USD and commodities trade up together along with the market which has happened for sustained periods in the past (at least in the case of climbing USD with a climbing market) at least until high commodity prices choke the economy again.
The summarized version, is hang tight and wait. I don't personally find an edge on a daily basis as long as this kind of expectation is in the air for the next few days. I'll be waiting to see how the summit goes and how the week closes before trading anything and of course watching what the charts say is the truth. Anyways, that's all I've got right now. Cheers.
