Nightly Report. December 28, 2011

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I am kicking myself at the back for violating my own trading principals. I have been writing for the last three days that a correction is expected and necessary for further up move. And yet I did not take profit and re-enter at a lower level like I did during the last pullback. Most likely I was complacent or I did not properly estimate the size of the correction. Just proves that every now and then the market shows you who the boss is. We all do our song and dance to win the heart of a fickle sweetheart but there is no guarantee. One momentary lapse of concentration, one deviation from the trading principles and we end up flat on the back. Luckily for me, there was no actual loss, but I feel that I have missed out on an opportunity.

Two things I was and am fairly confident of. I believe SPX will be near 1300 or exceed it during this cycle and a correction was needed / on the way before we reach that target. So now that we have the correction, next four days should be in line with the projection. I work with many parameters. Cycle analysis, TA, sentiment analysis, liquidity flow, market noise analysis, and different time frames and so on, so forth. So far, notwithstanding the 1.2% correction in SPX I think we are on course for a high next week.  The correction of today should not derail that conclusion. Let me present few TA which everyone can apprehend.

First the daily chart of SPX.

SPX Dec 28
It seems the correction stopped on the sloping tend line.

Next is the NYMO.

McClellanOscillator Dec 28

We have drawn another trend line through the sloping tops of the NYMO and here also the correction has stopped well above the line.

NASI is showing that the trend is intact.

Also let us look at the seasonality factor again.

I will be drawing your attention to this chart few more times next week as well. As you can see, the market behavior is consistent with the seasonality factor. There were no external factors disturbing the market today. This correction was totally expected and now we can move forward. I will continue with my analysis and I will come back with further post at night if I think I have found anything serious which will make me change my mind about the market tomorrow.

Also remember, today was a Major Distribution Day and in the normal course the day after is green. Add to that the seasonality factor.

Last thing for the day is gold. If you recall my last post on gold, I mentioned that if GLD breaks the long term trend line, there may be additional problem for gold.

GLD December 28

As you can see, GLD broke that line today, although still half in. And it is much oversold. So again, we may see some near term bounce but when the stock market tops next week and starts major correction, we may see more downward pressure in gold.

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