Market Overflow Newsletter
Full Market Analysis
As of 12.4.2011
Our newsletter is another weekly update on the markets as a whole, which is a broad perspective on the core markets that helps us to better anticipate the next directions as they relate to each other.
In summary, the markets have received another shock of a coordinated central bank effort to increase liquidity around the world, so that failing banks could get increased access to US Dollars to pay their debts. However, to balance that news shock, there remains downgrade potential to Spain in the near term, as well as many other Eurozone countries. There also was news breaking last week that Conservatives were potentially creating a bill to prevent an IMF bailout of the Eurozone, which could help spark a “risk off” move. The news is definitely something to be aware of, but we believe the seasonal flows may continue to support equities as the risk of more intervention remains. Based on our research and analysis, we believe the USD has some room to fall and the SPX has room to run higher as the path of least resistance in the near term.
The charts that we have presented below display the potential for equities to move higher through year-end. However, our bias remains bearish risk once the move higher in equities completes its course, and we are likely to see a sizeable down year for equities in 2012. We must continue our discipline of intermarket analysis to help us identify these next moves, which we plan to capitalize on along the way. Our approach is “plan our trade, trade our plan”, which we encourage all of our members to focus on as we provide the research and analysis to guide our trades.
The increased volatility should continue in the weeks ahead. The larger trend continues to remain bearish as the longer term cycle will eventually create plenty of selling pressure. The SPX, EURUSD, Oil, and TNX have been moving together, which continues to be anticipated. Our longer term bearish bias for the SPX and bullish USD stance remains to be our conviction. With that bias longer term, our shorter term bias expects the markets to continue to follow their correlations as we believe the USD moves lower and the SPX moves higher. For the last several months we have been suggesting that the markets could make a major shift in the weeks ahead that could have a large impact for the medium and long-term. Although we are bullish risk for the shorter term, we maintain that the past couple years have been nothing but a bear market rally in the larger economy and specifically equities.
We want to highlight a few charts for the SPX and TNX. Both are suggesting that “risk on” is likely to continue for the next several weeks. The SPX daily chart displays a completed (a) then (b) wave move, and currently price action is pushing higher for a wave (c) and completion of wave (ii). The SPX shows a breakdown of that price action with an hourly chart. The TNX daily chart displays a completed wave (iii) lower with an abc correction currently retracing higher.
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SPX Daily Candle chart
SPX Hourly Candle chart
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TNX Daily Candle chart
SPX / ES – Bearish
Our wave count suggests lower levels in the near term, but the larger corrective move should return to continue pushing higher this week.
USD Index — Bullish
The USD now displays more potential downside in the weeks ahead, as the broken trend line resistance proved to be only a spike move, which should be completely retraced.
EURUSD — Bearish
The opposite of the US Dollar is the EURUSD. The USD is likely to continue to weaken, giving the troubled EUR the opportunity to climber higher against the buck.
CL Crude Oil — Bearish
The breakdown through the trend line support proved only to be a fake-out, as price action has clearly push back above and likely to continue higher..
Gold — Neutral/Bearish
With the USD looking at lower levels ahead, Gold will likely be sought as an inflation play with equities pushing higher.
Silver — Bearish
Similar to Gold, silver appears to be headed higher with equities.
TNX – 10 yr Treasury Note — Bearish
Although our bias remains to be lower for the longer term, which we continue get closer and closer to our long-term forecast predicted months ago, yields are likely to push higher in the near term.
Market Bias & Forecasts
| Market | 1 Month | 3 Months | 6 Months |
|---|---|---|---|
| SPX | Bullish | Bearish | Bearish |
| ES | Bullish | Bearish | Bearish |
| Gold | Bullish | Bearish | Neutral |
| Silver | Bullish | Bearish | Neutral |
| CL | Bullish | Bearish | Bearish |
| DX | Bearish | Bullish | Bullish |
| EURUSD | Bullish | Bearish | Bearish |
| USDCAD | Bearish | Bullish | Bullish |
| AUDUSD | Bullish | Bullish | Bearish |
| GBP/USD | Bullish | Bearish | Bearish |
| USD/CHF | Bullish | Bearish | Neutral |
Love your post . Really
Excellent premium content! Also I have enjoyed your new newsletter, which I recommend anyone to sign up and take advantage of. Having this information has really saved me from making some incredibly emotional trading decisions!
Thanks Denco. I’m glad that you have found value in it. As we always encourage, Plan your Trade, Trade your Plan.