Short & Intermediate View of the Market

The US indexes predictably rallied during the happy holiday week, with Friday putting a nice punctuation on the bullish proceedings.  In fact, I caught myself looking at the TECL, NUGT and individual gold miner positions in my trading account with a big dumb smile on my face.  Then I sold them all.  Sidetracking for a moment, I have found that I need to get back to more active trading so I am going to further fund this account and ruthlessly trade this market in a discreet account for pure trading.

Back on the post’s theme, the holiday volume was suspect to say the least.  I have a preferred macro theme for the intermediate term however, and it is bullish for an extended rally pending a confirmation of, or more likely a cleaning out of last week’s bullish enthusiasm.

spx and ndx

However, for the intermediate bull theme to come about, the market probably needs to take a break first and do some consolidating or bottom testing to build a good rally platform.  Otherwise it could be going on to double top city and a more bearish intermediate view.

Both SPX and NDX are at visual resistance zones after retracing 50% and 38% respectively of the sharp holiday rally.  Upside limits are 1425 on SPX and 2670 on NDX.  If they get above there then the immediate term analysis will probably degrade on a risk vs. reward basis.  So Mr. Market, you are advised to take a dump soon and do some bottom testing or at least consolidate with a downward bias.

The lows from the end of May are the absolute parameter on a new bear market or lack thereof.  Lose the May lows and these markets would be broken.  Above them and the cyclical bull market lives on.  So we want to see the leader, NDX not make a lower low to May.  In fact, one signal we might look for is a higher low (to the early November low) by NDX while SPX potentially makes a lower one on any short-term correction that may whip up.  This would be a positive divergence by a leader and a good bull signal.

The NDX failed (and remains below) the 200 day moving average, which I think moved some bears to call ‘bull market over’.  But the moving averages are trumped by lateral support, which held.  Let’s see how the short-term plays out, because it is important to the intermediate picture.

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