The day went by as planned. It was a typical NFP day. Open high go lower, type of day. It created a hollow red bar or reversal bar. It does not mean indexes will go south from here on Monday. It just indicates that a top of some kind is close. Also, if you see the full stochastic and RSI, they are at the top of the range, turning down.
But NYMO is still in negative territory.
According to my calculation, the top is due around December 6. So may be Monday, December 5, we shall see SPX trying to break 1265 again and possibly failing. But I do not expect it to fall much either. I think it will remain within that symmetric triangle and we will see a mini Santa rally from 15th December.
I would be very surprised if SPX does not close the year around 1272.
We have to trade what we see, not what we believe. Yes, the macro economic situation is bad across the world. Europe is almost coming apart at seams. Greece would possibly default by June 2012, if not earlier. But I still do not see the world coming to an end in 2012. If anything, a Greece default will be positive for stock markets. I know, I know, I would be mocked and possibly branded as insane in the blogosphere for the audacity to say so. But TPTB (the powers that be) have already made adjustments for that eventuality. Of anything, it will remove the hanging sword over the head.
I want you to see what happened in 1982. Mexico defaulted. USA was worst affected. Yet the stock market started its bull run from that point. Yes, it does not prove anything. We can draw any analogy from any past chart to give credibility to what we think. We can draw any number of lines anywhere and prove that it’s a bull market or bear market. I am not saying that we will have a new bull market soon. All I am saying is that I do not see a 2008/9 like situation in 2012. I said the same thing about 2011. With so much news driven volatility, we are almost at the same place, where we started the year. The sky has not fallen on the head.
Going forward, there will be opportunities on both sides. But those opportunities will be for a quick time frame. My objective will be to identify safe trading opportunities on either side. Yes, the debt super cycle will end eventually and it is a question of sovereign solvency. But the central bankers and politicians of the world will try to solve that problem with more and more liquidity. Eventually they will fail. Mullahs will ultimately blow things up. Chinese ego will get better of their economic interests. Europe will split into two. But the bear market will come at the height of euphoria not when the mood is so down.
We will see.
For my readers, I have a favour to ask. Please join my Twitter account (@BBFinanceblog) and ask your friends to join as well. For those of you who are already following me on Twitter, my sincere thanks. I will work my best to bring you the market opportunities without any bias. I am neither a bull nor a bear. Just an opportunist who wants to play safe.
Have a wonderful weekend folks.