The Christmas rally was always going to happen during the holidays. The low volume computer model driven market was ripe for manipulators to pump up prices, but what now? It seams the monkeys are running the show, so far Mr Market is ignoring the massive European sovereign debt roll over due in the 2012 Q1, add to this possible Europe's collapse into recession.UPDATE5
We all remember the early August 2011 7.5% SP500 rally that was followed by a 19% sell off. This means a 8% pump up in stock prices means nothing any more. The big boys can pump up prices to sell into (distribution) at will. Sure the recent ISM number was surprise, employment was better, but no cigar as the debt crisis continues on.
We find favor with this article: Morgan Stanley On Why The Gig Is Up
Bearish Market Movers
- 2012 Q1 No more economic surprises, this news has peaked, and so has SP500.
- 2011 Q4 earnings will not break expectations, thus new highs in SP500 cant be expected
- Fed juice of any sort will not happen (Inflation is near 2%).
- The market has been pumped up on economic indicators that are lagging (ISM, BLS employment)
- Massive sovereign debt roll over in 2012 Q1 will keep risk off a red 'sell button' away.
- ECRI Index (leading indicator) after a small positive bounce sank again to -8.2, US recession call STILL ON, see here
Bullish Market Movers
- The ECB puts all the debt onto their balance sheet (cant see this happening, yet!)
- The Fed does QE3 (then oil to $200, yip that’s great for Obama chances)
- US Economic (PMI) numbers continue to decouple from the rest of the world. (Yeah right!)
- The massive shorts on the EURUSD are forced to cover. Forcing the RISK ON trade to a higher gear (Ben Bernanke calls the CME to raise margins on Euro futures, yip that will do it!)
We feel the holiday period was an excellent time to pump up prices to allow selling at a higher level. The professional traders know the SP500 will be forced down by bad European news, some call this a 'bull trap'.
UPDATE1: Funny how cycles are timed with important market events, that they dont know about. Here is your catalyst for a sell the rumor buy the fact this week.
Source: European Bond Supply and Greece’s Trojan Horse
,,"European sovereigns return to the capital markets more substantially next week as 2012 issuance gets under way. Between bills and bonds, around 35-40 bln euros will be sold. Maturing issues and coupon payments will cover about three-quarters of the bond issuance. The market’s focus is on the Spanish and Italian bond offerings in the second half of the week. "...
COMMENTS: The last bond auction for Italy was not so hot. Who will buy this junk? The US Federal Reserve, ECB, some European bank with a gun to its head. Risk off this week as the market gets a tad nervous, and if bond selling doesnt go well. Ouch !
UPDATE2: Forecast Earnings for 2011 Q4 keep falling. Earings have peaked.
Source: Q4 Earnings Estimates Trickle Lower
UPDATE3: Earnings for 2011 Q4 are not expected to be that great.
Extract .."This suggests that this earnings season will have the smallest actual number of earnings beats since the end of the recession three years ago. In other words, this metric is suggesting a relatively poor earnings season."...
Source: Earnings Estimates
UPDATE4:Forget The Downgrades, There's A Much Scarier Turn Of Events Taking Place In Europe
Extract.."S&Ps big Eurozone ratings downgrades make for some good conversation, but in reality, there's a good chance they won't change very much. Perhaps the downgrade of France will impinge on EFSF funding, but at this point, people have been bearish on the idea that the EFSF will really be what saves Europe.What got overshadowed yesterday is the fact that the negotiations between Greece and its creditors have broken down."...
UPDATE5: The very low volume rally has pushed indexes higher in Jan 2012, the tape wins this one. The FOMC meeting may be the turn point, watch an wait. We believe prices have been pushed higher for selling into, thats all, no new bull market here.
Chart Review: Gann Angles
- (1) The 2011 August pump up, that followed with 19% sell off.
- (2) and (3) could be a double top.
- Watch the bearish 2x1 Gann Angle from (1). Should hold.
- Never say never with this market, but $129.50 should hold
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Chart Review: Short Term Cycles
- 13 period, broken during holidays low volume period
- 18 period, looks in charge
- 39 period, signals are third cycle top is due.
Of course if sentiment is very bullish, we may get a market top for the 39 period at higher SP500 levels, you cant rule that out.
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Chart Review: Seasonal
- We expect a sell off between now and end of Jan 2012 as the market has not priced in Europe sovereign debt issuance yet and 2011 Q4 earnings will only meet expectations and not surprise.
NOTE: Missing is the 2010 year, a mild sell of was around Jan 18 2010.
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The bears are planning their attack...Cycles say soon, members set up your charts, and go for it !
UPDATE4: Short term cycle chart update..
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..“The desire for constant action irrespective of underlying conditions is responsible for many losses on Wall Street, even among the professionals, who feel that they must take home some money every day, as though they were working for regular wages.”..