Despite that, the VIX remains low as the market has now built in a deal and if they don’t kick the can down the road we run the risk of a black swan to start the year. I doubt the market is capable of crapping out during the favorable seasonal period. Helping the market even more is the Sunday night action in the Greenback which finally broke down from critical levels at the A wave tendency line. In my work, we look for pullbacks which become severe to hold the A wave high of the last move going the other way. The Elliott people look at as a 4th overlap line. If it’s going back up, chances are it will not violated the territory of what we are calling the 1st wave. My methodology is borrows from Elliott but isn’t as strict. But Sunday night was a clear violation.
The chart of the week is the Greenback breaking down on Sunday night. Last week it hit the A wave line, held it and tried to bounce early. What I told clients was the bounce wasn’t that impressive and the best it would do is challenge upper resistance levels but at no time did I think it was going to be a fresh leg up. Like the stock market that didn’t get much of a chance to drop, the Greenback didn’t get much of a chance to rise. Now it’s played its hand and I think that the best case scenario for the first half of the month is the Dollar staying in some kind of a trading range. What that does to stocks is keep them neutral to positive. We like biotech and pharma for our clients. Overall, the Santa rally is and has been under way since its early inception prior to Thanksgiving. At some point this month I think we get hit and I also think we are going to roller coaster like Europe until they hammer out a deal. This market will be much friendlier to traders if you just understand this game.