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Sunday, November 21, 2010

Season to be jolly

This week starts the beginning of holidays full of festive and cheerful mood across the nation.  People happy shopping smiling giving and a general sense of warmth and looking forward to a better year in 2011.  Historically markets have rallied  in November and December.  Even in the worst year these months have at worst seen only a mild decline.  Given that and also the fact the volume is low compared to other months and FED is bent on pumping money into the system "come what may"  I do not believe we will have a significant decline.  There was one chance for the markets to terminate at 1227 and start a good size quick decline to 1130 but we have missed that.  I believe we will see higher high for the spx in coming days.
  
The chart on the left is spx monthly.  This is an important chart in my books.  Clearly we are inside the blue channel.  Should line 1 be broken that will cause me good reasons to worry and the same time should line 3 be broken spx has a good chance to sprint up.  Around 2  I have marked a circle and there is congestion.  Line parallel to decline from March of 2000; the center line of the current upward channel; line from Oct. 2002 parallel to Aug. 1982 bottom to Oct. 2007 top and the bottom of EW (1) at 1257 all intersect.  This happens in January next year.  All this much action makes this chart an important one. 
The chart on the right is spx daily.  This has clearly defined channels and a median line.  I do not believe the rally from 1039 is over.  The last decline from 1227 to 1173 was 25% of the rally.  This one generates buy and sell signals based on very simple last two point trend line.  To short the spx should pass the trend line that is drawn from last two lows with the latest low higher than the first.  Currently it is the bottom line of the green channel should fall for me to short.  To go long the trend line joining the last two highs must be violated latest high lower than the previous high.  I have marked a few buys and shorts on the chart.  I find this to be good medium term signal.

The chart on left is my hourly spx.  The channel construction lines were drawn in this order 1 2 3 then 4 6 5.  It also has my DOMA 77.  This is my short term trading chart and I look at it a thousand times a day.  The top happened at the intersection of slow and fast channels and so did the bottom.  The best place to short when spx came to the under side of DOMA 77.  Now if spx clears the DOMA 77 again to the upside (my belief is it will) that would be a signal to go long.  There are other things I watch for short term such as my DMRM and 10x20 cross etc.  This is a primary short term chart for me.

I am bullish at this point because of holidays and the fact we are only a few points from last high.  Next few days volume would be low and beginning of new option month.  We will see price movement but not any volume to accompany it.  I will not be trading this week. 
Thanks for visiting my blog and offering your encouragement.  Happy holidays!

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