I am fully aware that lines can be drawn anywhere on a chart and do not have magical predictive powers and therefore all who are blessed with the power of hindsight please desist from comment !
Just some random ramble or if you like a long term play, some reasons to be looking South !!
The first image is my weekly chart, the Fib extensions clearly show us trapped between 1465 and 1424 similar to the trap between 1391 and 1353 back in April - both around 40 points as well!
The first trap held us for 5 weeks before price dropped nearly 80 points - we are coming to the close of the 5th week in the current trap and we have convincingly broken the trend line on the momentum oscillator The only possible positive I can see in this scenario is that price may rise sharply dragging the oscillator back to the diagonal trend line (Pink) before moving lower for the longer term - this is only a possibility due the impending presidential election / decline in the Dollar / FundaMENTAList's believing all they hear in the current reporting season - to do this it would also have to break the horizontal long term trend line (Green) which has marked all major turning points in the current up trend since April 2010.
More doom - note the 'rising wedge' formation formed by the trend lines in the smaller weekly chart below. Confirmation is the divergent oscillator and the overall economic situation in the US - USD declining/weakening (becoming a leader) ES to follow and current correlations are broken - new ones formed (it has been commented on recently 'Oil seems to have its own agenda at the moment' 'The Nasdaq (tech stocks) seems to be on a run of its own - nothing is following it up')
A rising wedge as you may be aware is an extremely reliable predictor of impending reversal. And notably we appear to be at the 'thin end' of it !!
In the immediate short term however - it looks like we might just scramble to around 1465 and the market may just hold, though be declining slowly, till Nov 6th. From then on the new incumbent may well be praying he hasn't got a share option in either 'Green-back' or the S&P as part of his pay deal !!
May I suggest that all who have an interest in the S&P watch the COT reports very carefully over the next 4 to 6 weeks to get a feel for how the institutions view firstly the presidential result and secondly the current levels, being as close as they are to the limits in 2007(within 6%). For a Fib fan but not a Math genius - that would be a 94% retracement of the decline from 2007 !
Below on the daily chart the decline in the oscillator has followed the trend line to date but hasn't yet reached the over-sold levels seen back in mid-May - my inclination is that; failing a miracle, we are headed lower - a lot lower but when is still open for debate. After the election ? Certainly. Will we see a bid for the 2007 highs? I doubt we will get that high, too many people saying 'watch out - here it comes again'.
That leaves us with a turning point somewhere between 'here' and 1470 !!
There! That's my neck on the line !!
