ES closes the last four days as follows:

1310.50, 1310.75, 1311 and today 1310.50

Does anybody still think that there is no market manipulation? As usual, volume was almost non-existent and well below average.

Given that we are being set up nicely, where the retail is encouraged to buy buy buy by various talking heads of CNBC and other MSM, this itself should raise the red flag that there is cliff ahead.

Everything is screaming for a reversal but the money flowing in from Europe is keeping the US stock markets alive. Some of the reversal patterns are so rare that they happen once in a while and yet we are hanging on. Can the market defy gravity forever?  Unless there is more free money infused by the Feb, it cannot. So may be one more day we will have to bear the agony. In the mean time, gold down, silver down, oil down, copper down and equities barely moved!

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We ended the day with a spinning top candle in SPX and red in DOW as well as Nasdaq. And the volume was non-existent. So far the much anticipate correction has not materialized in any meaningful way. But even when I am trying to become bullish, I am unable to find much upside in the market. 16 SPX points after 1300, SPX is sitting just below the long term falling trend line, with all parameters and indicators over stretched.

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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.

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The last two days were really hectic with no internet connection and fifteen hour flight etc. As such I could not post anything and my apologies for the absence.

In the meantime, the stock market in USA has been a one way street. It has so far defied all logic and divergences. It has gone from extreme to further extreme. But such extremes are not backed by any fundamentals. We all know that seasonality pushes the stock prices higher at this time of the year but usually there is a correction during mid-January which has not happened yet.

I was looking for SPX 1300+ during the 1^st week of January but it did not come then. I was also expecting a mild correction and continuation of the rally in the 1^st week of February. So far the correction has been elusive. The problem with such situation is that without a correction not much upside can be expected in February.

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As the US stock markets are closed on Monday, we can take the queue from the futures and Asian / European markets about the coming week. In any case, it is expected to be a red week. January option expiration, MLK week and mid-January seasonality, all points to a lower direction. And in any case, markets are over bought, over extended and need to be corrected. So at least for the next week I am bearish.

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