The big question this week, will the Santa Clause Rally happen? If we get a rally it is like a predictor of the years outcome. In 2008 the Santa Clause Rally did not happen. The markets went down 7+ % during the week after Christmas. After this the markets tanked. I am on the sidelines watching this week. I had a few set ups but the risk was too high for my taste.

Here is the set up for the Santa Clause rally on the market. We are bumping our head at the 126.00 level this morning. I do not think we will break it today. If we do then the Santa Clause rally is in play. I really think it will make the move either down off of this resistance or up from this support. So I just gave an analysis where I am right both ways. Here is the deal though….this is resistance. This dictates what we will do next. I see the job of the trader as finding these pivot points and trading with the momentum. Now I feel it is going to go down Tuesday which is the highest probability. History though brings to light the famous Santa Clause Rally. Let’s see if history holds.

I am pretty confidant the SPY is going to the 126 level by Friday. It is up in pre-market to 124.67 currently. The 126.00 level is where diagonal resistance is holding. If the Santa Clause rally s going to play out we will need the 126.00 level to fail. DIA and QQQ are in basically the same boat. The DIA resistance is horizontal instead of diagonal. The IWM will break the resistance this morning. It will have to deal with the next 2 levels of resistance which are 75.34 and then 77.20.

Continue reading →

The Q’s barely broke the 50% support level today which was around 54.50. The Diamonds broke the 23.6% 117.70. SPY and IWM are holding support at the 38.2% fibs. The SPY is approaching the diagonal support line. So I expect when it gets to 119.70 level it will pause. What it does next will either move to the 126.00 level if it bounces or drop to 117.50 level if it breaks the diagonal support. Either of these scenarios has us in a bear market. I need to study more how the bonds that Bernanky is releasing Wednesday will impact the markets. Their seems to be some chatter about it among bloggers.

I am of the opinion that the market is going to go down before it goes up. Fibonacci is supporting each of the major indices SPY 38.2% 121.00, DIA 23.6% 117.70 , QQQ 50% 54.50 and the IWM is between the 38.2% 70.75 and the 23.6% 73.21. SPY, QQQ and IWM are in a downward trend. The DIA is neutral due to a lower low and a higher high. This week is going to be interesting. I am going to continue to watch the EUR/USD. I cannot see how the Euro is going to survive. This should rally the dollar and drive the market down. Gold is in a bear trade with all of the metals. Most of the blogs I am reading are talking about the Santa Clause rally. I feel this is just a bunch of non sense. Let’s see what happens.

The SPY is holding at the 121.00 level. I read a few blogs tonight that seem to think the market is going up tomorrow. If it does go up it does not have far to go. It is making a nice triangle. Once again it may coil up. If it does then we will be in wait mode for the next move. The cup and handle I mentioned last night on the UUP is still looking ok on the weekly. We really need it to break above the 22.61 level for the move to be realized. We are in a few puts that really look good. I would like to see the market get below the 121.00 support level. We shall see.

Today went really close to what I discussed this morning. The SPY went to a low of 121.47. This area is proving to be good support. I expect this area to hold for a bit in the morning. Once the news starts to hit things might move. I can’t imagine what good news is out there. Bernanky said after hours that the fed would not help the Euro banks. This should mean that the dollar will continue to rise and the market should continue to move down. You can look at the UUP to see the action on the dollar. I just took a look at it and it is forming a cup and handle (pictured at the header for the blog). If it breaks the resistance 22.62 it will climb in a nice manner. It tried to get above it today but came right back.

Bernanky spoke and the market took off in a downward direction. I love this guy. The bears are in force. We should see the day go down and test the 121.00 area. Some of the Puts we are going to get into today are EOG, TXN, CSX and HLX. They have met the 2:1 ROI criteria. I am not sure what the option availability will turn out to be. If this looks good then we will be going ahead. Off to the office.

This market is not looking good. I am seeing the SPY at the top of a downward channel. 127.21 is the resistance line that I am expecting to hold. Lets see if it rolls. Here is a link I read this weekend that really sums it up http://slopeofhope.com/2011/12/crash-landingevil-plan-290-not-done.html . Enjoy.