Slope of Hope Blog Posts
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After the surreal week when equities defied all logic and reasoning only to gain 15 SPX points, the hangover from the party may be due next week. In the process, all trading parameters have been trashed to the extreme and if there is anything called super overbought, it is here and now. But we all know that markets can remain irrational longer than we can remain solvent or sane. So we see die-hard bears throwing in towels. When such a thing happens, you know that the reversal is round the corner.
The situation is not a cut and dry one. I expect a higher high in February before weakness returns with a vengeance. By May of 2012, the bulls will forget that they were ever so ecstatic. The mood will swing from euphoria to eternal gloom. But we have some unfinished business before that. For now let us take a short term view of only the next week and see what is possibly in store.
In my post on December 9th, 2011, I outlined a hypothetical scenario whereby if the Dow 30 played out over the next three days like it did on the 9th (it gained 200 points that day), we'd see the Dow reach 12800 by the close on December 14th for a "touchdown." Needless to say, it didn't work out within that time period; however, with today's close at 12720.48, that game plan is now within reach, provided it can push above a minor resistance level of 12754, as shown on the Daily chart below. The Dow has gained nearly 1000 points since the December 2011 lows. Near-term support is at 12600.