The S&P keeps going By Dominick
By Dominick Mazza
Dec. 11, 2006 — In the Nov. 18 update, I wrote:
Next Friday we have the payrolls report, but that is just another nonevent to take up airtime and the waste the week away. After that, Bernanke and the FOMC meet on the 12th – another snooze fest ahead of that day. Grab some pillows if you are going to be watching that. Then we have Christmas. But what we will not have is the usual tax selling. The smart money has been long for the last 200 points. No one who bought the summer lows or got on along the way is going to sell this market until Jan. 2. Now that is a day to mark on your calendar!
Until then, we have three perfect patterns that support a few knee jerk reactions off the payrolls and the Fed, followed by plenty of Christmas shopping. On the downside, we have only one setup, and it is not a high probability yet.
I posted to the site before the market opened Thursday that “something seemed fishy,” and boy did it! The gap up gave us that wiggle we needed and then down she went. Our instant target was 1410.50 on the futures and that turned out to be two ticks below the actual morning low. Friday morning was another trader’s dream as we faded the pre-market pop from the payroll data since we had a lower target as shown in the chart above. No sooner had we jumped out from that box as if it was a pot of hot water than CNBC came to the rescue with its so-called “news.” Someone was speaking and blah, blah, blah, the dollar turned up.
Now, as a pure technical analyst, it makes me laugh to hear all the excuses after the fact. I had mentioned in our chatroom that a reversal was our plan and, practically on demand, we got a 10-point move. If you ask me, the dollar turned up because it was entering a fourth wave bounce. Personally, I think the dollar is going to fool many traders in 2007, but I will get to more of that after the New Year.
For now, we have reached the point where it starts to get exciting. We saw call buying on the rallies again this week, and the bearish camp got a little quieter, which are contrary indicators for sure. So make no mistake, we are closing in on the sweet spot. I still have three working ideas, one or two of which can be almost immediately removed on Monday morning because we must either advance into the Fed meeting or sell off. The preferred pattern has a target of 1429-ish, possibly for Tuesday or Wednesday, but the larger patterns would see even bigger numbers towards the first week of January after a bit more work to the downside.
Either we are going to make the Fed the pivot to this ending leg, or we will work lower until the Santa Claus rally kicks in. Narrowing down the patterns on Monday will allow us to time our moves with more precision, but, to capture these moves, you should join now and read all the real-time analysis. A special money-back offer for today’s readers appears at the end of this article.
