Pre-Market Brief

Good morning! Futures are showing significant losses of around sp-10pts (we were down -14 earlier). I'm not sure what the reason was, but there were some crazy swings to the upside around 7am (See Finviz). The bears will clearly be somewhat delighted to see this opening move lower...will the bulls/algo-bots buy the dip?


Sp'60min

Summary

So, right now we are set to open around sp'1322. Despite how exciting that might be for the bears, even 1322 is 22 pts away from breaking the key 1300 level.  I guess we'll floor around 1315 by 11am or so.

Only with a move under at least 1315 can the bears start to wonder if we are seeing a trend change.

Even more so, only with a break below sp'1300..(32 points away right now!) can the bears seriously consider that the current rally is over.

For a clue as to whether we have a chance at breaking below 1300...look to the VIX. Bears will need to see a VIX +7/10% day. Anything less...it just won't be enough.

*It sure does look like a bear flag on that hourly chart..to confirm it..we need a break to a new low sp<1291...41pts lower.  We have GDP and Jobs data Thur/Friday, so there IS the possibility of a major down move.

The bears have an opportunity this morning... will they be able to hold onto such declines...and build on them?

More across the day.

The 2009-2011 trend line - monthly cycle

A poster pointed out something to me which I've been remiss to note. The trend line from the index lows of March 2009, all the way up to last October'2011..such a trend line (purple) offers a possible market floor of sp'1225/00 by late June/July.  Will that be the low for this year though?


SP'monthly

Transports, monthly (bearish/doom chart)

Summary

There is no question - as I've noted for the world indexes for 3 months now, that we are rolling over. The issue remains..where is the floor? When will the printing man..aka..the Bernanke appear? The Fed never pre-empts a market fall, so at what level might he step in to announce he is spinning up the printers again?

I have to think that sp'1225/00 will simply not be enough of a down cycle for the Bernanke to appear. The natural level in my view remains sp'1100/25 - no later than October.

Re: the Transports chart....

You can ignore the 'crazy talk' count, I'm not much a fan of it myself, but the key issue is that the 5 month flat top did break below 5000, and we're likely going down to at least 4500. Were there serious social/financial 'issues' this summer in the EU, then trans'4000..if not the natural 3500 Fib zone area appears still very viable.

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**Special note...I do really welcome all comments, especially when it comes to targets for the indexes (stocks, VIX, currencies too!). so if you think I'm failing to note something important, please let me know!
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As for Wednesday, there is only some housing data to come, doubtless the market will be pulled in both directions by more endless rumours from the EU. The bulls do have the ball right now, but they are facing multiple brick walls of resistance at sp'1340, 50/60 and especially the 1370/80 zone ;)

Goodnight from London City.

Daily Cycle Update

With the main indexes rising over 1% today, everything is back to risk-on, yes? Err, no. The bigger monthly index cycle can easily dismiss such market action as mere 'noise'. Lets look at a few of the key daily cycle charts...


Sp'bullish outlook

Sp'bearish outlook'2

Transports

Summary

The transports - despite today's rally, remains in a very clear bear flag. There is going to be a real struggle to break above 5200/250 by the end of this week. In fact, I'd be looking for the tranny to break below 5000 in the coming days. If that's the case...then we should look for sp to break under 1291.

My best guess for the mid-term would be something like the second chart - where we level out in this wave'2. These small moves are always a tricky thing to guess, and in the bigger scheme of things, it doesn't matter anyway.

As for the bullish scenario chart, well, I suppose if the Bernanke appeared - overtly hinting at QE3, and if the Greeks formed a cohesive new government in June..maybe then I could envision this market breaking to a new high >sp1422. Yet even then, the econ-data (both within the USA, and worldwide) pretty much sucks, there is an increasing weakness across the world economy. The idea that Sp' can comfortably remain above 1300...no, I don't think so.

Also, considering that the VIX continues to show some underlying strength...I'm still guessing the indexes will be considerably lower in the coming weeks and months.