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Weeks ago, as we approached the fiscal cliff circus, I seriously thought we would have a repeat of what happened last summer. At that time, during the "prequel" to this fiscal cliff debate, the S&P 500 plunged nearly 20% in a mere twelve trading days, virtually without a pause (it brings a tear to my eye just to think of it; our friends at ZeroHedge have put together an interesting analog between the two).
The current market seems to love the fiscal cliff. It can't get enough of all these press conferences, horse-trading, and tit-for-tat. Stocks have been thrusting higher almost without interruption since the morning of November 16th. It's just another in a long, long series of disappointments over the past four years.
So I wanted to put a few bullets into the bearish argument, just for the sake of balance. Plenty of predictions in the world of financial pundidtry go wrong (just look at my SocialTrade stack of Prediction Fails for a sampling.) I've certainly given my fair share of predictions that failed to pan out. So let's take a few swipes at the apparently ludicrous notion that the stock market is going to fall anytime in our natural lifetimes.
First chart below shows the QID scenarios posted two weeks ago
today. Prices today are basically where they were back then with QID
still bouncing off that support (S1) level. Not by chance, that level
coincides with the 3030-3040 resistance level on the $COMPQ and the
1430-1440 level on the $SPX, both of which are also being challenged
today. As back then, if these levels are taken out then the alternative
scenario then becomes the primary scenario, as prices on QID are likely
to fall to the next support level (S2).
It's a wonder that Pump 'n Dump schemes continue to try and prey on unsuspecting investors. Although it's hard to imagine this stuff is legal, the frequency of penny stock solicitations in our inbox suggests these schemes are alive and well.
Every now and then, an email slips through that really offers some nice entertainment value.
The latest solication arrived last week, on 12/12/12 of all days for ticker symbol PFNI. You would think that the Psychic Friends Network Inc., of all companies, would have an edge in forecasting future stock price appreciation. We are not making this stuff up.
Just for kicks, a few days later, let's take a look at how PFNI is faring in the markets with its stampede of new investors. The yellow arrow points to the daily price candle on 12/12/12, when the spam – er marketing – email was received.
Instead of heading to the $1 level very soon, as prognosticated by Elliott Dobbs, esteemed publisher (but obviously not a psychic), we actually crater to nearly zero the past two trading days. You just can't make this stuff up.
Our precious metals friends must be quite frustrated (I learned quickly with my posts at ZeroHedge to never question their religion; kooks are a passionate bunch). In any case, if there is any time that precious metals should be zooming to heaven, it is now. The US dollar is becoming a steaming pile of poo; trillions of dollars of new fiat money are pledged; the United States can't get its fiscal act together. Gold should be $2,500 per ounce by now.
But……..it's dropping. In fact, except for bonds, precious metals are just about the only thing dropping. The yawning divergence between the Euro and gold is breathtaking:
Well, it seems pretty clear that whatever "solution" is conjured up by Washington is going to be some feeble, watered-down, doesn't-really-solve-anything compromise. The US dollar is starting to fall to pieces and, incredibly, as sick as Europe is, the Euro seems poised for a hearty rally. At this point, I'm starting to think 2012 is pretty much over and done with. We've seen the rest of the year already.
Yesterday was a very nice day on the long side. I led with the nice bull setup on ES with a target in the 1427 area in the morning and that target was made by the close. I went long shortly before I capped that chart and closed out after the close so I had a very good day.
What now? Well short term the odds favor gap fill and some retracement today and the short term rising support trendline on ES from yesterday's lows broke a couple of hours ago, so ES may well be topping out short term before that likely retracement closer to the open. Looking around longer term I'm seeing mainly bull setups here, and I'll run through some of those.
On the daily chart SPX is approaching resistance in at the upper bollinger band in the 1435 area. In the event that we are starting a trending move however, and yesterday's move did look impulsive, that just means that SPX would start to push the upper bollinger band upwards. Strong support is in the 1411-16 area at the middle bollinger band, and the 50 and 100 DMAs, and I'll be leaning bullish overall as long as that area holds: