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In the spirit of the season, this evening I am heading off to the local theatre to help set up for a production of Nutcracker, so I'm going to do a post early and be done for the day.
What strikes me about the market right now is how NON-seriously people are taking the fiscal cliff. The assumption seems to be that there is a 100% chance that this thing is going to get solved just fine 'n' dandy, and not only that, but gee willikers, when an agreement is made, it's just going to be darned great for everybody.
That moment between when an anticipated opportunity crosses the line to an inevitable outcome. The moment before the ship actually sinks….between when everyone knows the ship is taking on water, to realizing the ship is actually going to sink. Panic ensues from the moment of realization until the moment when the entire ship is sunken. The moment before a car crash, when you actually come to the realization that you have lost control of the car, and will crash. Today could very well be that day.
I posted two of the below charts earlier today in the comments section, as well as on SocialTrade. Why is today important? First let's look at an hourly chart of the SPX. This morning's high at the open made a near perfect touch of the 61.8% Fib retracement from the September high to the November low. Also, you will notice that coming off the November low, SPX has formed a very nice rising wedge. A break of this rising wedge to the downside could have very bearish consequences for a few reasons.
I was saying in my weekend post at Marketshadows yesterday that if we are going to see the bullish scenario into 2013 fail, then the most likely place to see that failure is near the highs last week, as SPX tries to break over the weekly middle bollinger band. You can see that post here. Historically the odds for a break above are good, with fourteen moves to test the weekly middle BB from the lower BB in the last seven years, of which eleven broke back above, and of those nine then reached the weekly upper BB, now in the 1455 SPX area. However three of those did reverse at the middle bollinger band: