What I want to do right now is just look at each of the markets that I follow to see if we can see anything that might give us an idea where we might be heading in the very near future. No one, and I mean no one can tell where we are heading. They can give you their best guess, but no one knows what tomorrow brings.
Looking at the last 3 pivot lows since the last was created October 4, 2011, we have a uptrend. It might not be pretty, but it is an uptrend. What gives me pause or hesitation is the fact that we cannot and have not broken through $1267. We have 3 points of resistance from here to get through and they are tight together. $1267, $1277, and the major resistance point of $1292. I expect volume to return January 3rd when the markets reopen the first trading day of 2012 and that should give us an idea the sentiment of the traders. If the little Bull flag that is building holds true, then we should see a little pop up soon the first few weeks of the year. That is not a prediction, just an observation based on chart patterns and what normally happens.
The Small Cap has one major concern and that it is still below the 200 day moving average. Very seldom does a market climb when it is below and falling below this average. Like the S&P, it is technically in an uptrend but it is very weak at best. The convergence of the up and down trend lines leads one to think that something is going to happen very soon. Which way it goes is the million dollar question. I really believe that the Small Cap needs to close above $640 before we see a major run uphill. I also believe it needs to hold above $602 to maintain this weak uptrend.
The NASDAQ could be our leading indicator when it finally makes a move. The reason is the uptrend and downtrend lines are a bit sharper. I have the same concern here as the small cap in that the NASDAQ is below the 200 day moving average and that is never good.
The Dow 30 is the best looking of all the indexes in that the uptrend is climbing into the overhead resistance so some type of solution has to happen soon. I believe that by January 15-20th that something has to give and we will have a break up or down to follow. I also read recently that unless the Transportation are following the Dow30, then what you think might happen, might not be in the direction you expect. The Transportation chart is perfectly identical to the DOW 30 so this leads me to believe that odds favor a break to the upside.
This leads us to the International Fund which is mostly European stocks. The last few months this has been the Achilles heel of our markets here in the United States. There is still much to be fixed in the banks in Europe and I’m 100% sure that we will hear more bad news from that section of the world sometime this year. So we have to be aware that this can happen and just try to deal with it. The last 10 trading days, volume actually picked up and prices went up at the same time. This is a classic signal that prices are reversing but I firmly say that it is way to early to believe this sign. 10 days of trading does not make a trend reversal. We need to see some higher highs and some higher lows.
So after looking at all the charts or indexes above you have to come to one conclusion. Something is going to happen soon but which direction it is going to go is anyone's guess. The smart thing to do is to stand down, sit in the G-fund or safe fund and wait for the break. So that is where I will leave it. If the market here and overseas breaks down then Bonds or F-fund is going to be the best place to be. Looking at all the other countries out there right now, where do you want to put your dollars? Just like you, most oversea traders think the same way. Below I will leave you with the bond chart and looks like it is in a uptrend channel but is currently fighting a little overhead resistance at $110.34.
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