Banking was holding up pretty good until Wednesday and for those who think the market sold because O won, the market can do really well under a Democrat so that’s why we don’t buy any of this socialistic mumbo jumbo. What people don’t like is the dynamic didn’t change. It’s the same President, with the same fight with the same Congress. Besides, markets were looking for an excuse to sell. Don’t get me started on the VIX, which can’t get above 20 and for the life of me I can’t abide the complacency we have in this market. If people think it’s going to sustain from this level, it’s just not going to happen. For the first time we have some technical damage. To this point tech was leading to the downside but the banks get involved, it becomes a problem.
For the chart of the week, we have a very good read on overall conditions. The SPX was in a potential ending diagonal wedge formation. As you can see, when we have the connect the dots line from the 2011 low and the earlier one this year we are testing that area right now. If it breaks, chances are that’s the high for this year and well into the first quarter of next year to say the least. But if that rising line holds, we can still see one more high for the 2012. This is November and we are going to have a Santa Claus rally, we always do and that’s why we’ve been down in a semi-hard way. But even with the sour taste of the same dynamic in Washington, its only one day and the VIX still isn’t anywhere near the fear levels I need to be confident in a lasting bottom. We have not had that wash out kind of day where everyone gets the feeling it’s never going up again.
Why might we get a low this week? With our new technical addition which I’ll just call Quantum Thinking for right now the US Dollar has backed off and surged ahead towards a larger degree attractor line to put us in a target zone in the 81 handle. Now it is starting to form its own intraday wedging pattern. I’m looking for moderately higher prices so at the end of the day it’s feasible the Greenback could top this week. That would allow us to see a new high in the SPX. However, it doesn’t have to happen and this weekly SPX chart is a good benchmark. Seriously, with the way the banks are behaving right now, it doesn’t have to turn around. It could very easily violate here and give us a hard drop into the Thanksgiving time frame before the holiday euphoria starts to kick in.