The collision of global markets and social mood

Wednesday, May 9, 2012

The Falling Wedge Visits The Futures

Remember all those falling wedge patterns that started showing up out of nowhere in the S&P cash index?  Well, there's a real beauty setting up in the futures since last Friday.  If yesterday's lows fail in a material way, the cascade could be significant.  It will mean that on the cash S&P, we will have turned down from yet another 23.6% Fibonacci retracement.  And that says WEAK MARKET.

It is very possible that price finds support around the lows and rallies in another up leg.  But that would merely postpone the problem.  Furthermore, it would need to absolutely rip higher with massive price spread and volume.  But after yesterday's rally, I find that doubtful.

It is also possible that yesterday's rally was just a 3-wave correction.  Actually, tick data infer that yesterday's rally was short covering.

A quick Fib extension from the highs to the lows using yesterday's high as the swing targets 1298.17.  Note that the 200-day MA sits at 1276.73.  The 38% retracement of the rally from last October's lows roughly coincides with the October 1292.66 high.  Below 1340 and it's game on.  Institutions (imagine holding positions within the S&P index of 2 or 3 million shares) will freak out.  Many markets have already violated that area.

Good.  It's about time.  After my expedition to the mall the other day, I noticed I was actually angered by all the in-my-face, over-the-top orgy of color because I know what indirectly caused it.  Easy money.

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