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At market close the F fund buy signal just got muddy. More about that later.

Which market leads - US or Europe? Look at a area chart of the German composite (DAX), which is the best of the best for the Euro zone, with the SPX cash merged as a line chart. Most of the time there is a close correlation, except for several lagging DAX periods including from August 2011 until now, and from Oct 2009 to May 2010. For the earlier period, QE1 was ending or wearing down. QE2 ended in June 2011, if I remember correctly. So how long can the SPX levitate above the DAX this time?

Dax_SPX_01_09_12.png
Since the start of January the SPX cash gapped up and traded in a 18 point range for the last six days. The ES SPX futures are shown, where you can see the upside down triangle. Markets like to test major breakout points, so I assume a backtest will occur fairly soon. This area is the intersection of the support ascending dotted line and the upper breakout descending dotted line (where I drew a red line). Looks like about 1140 on the ES futures or about 1145 SPX cash. That is my idea of a near term retracement target. If that region holds it is a buy signal for equities.

Now after the lst few days of indecision tug of war, it appears that SPX may trade higher first. The 1290-1310 region should be the highest top if this scenario materializes. Howeever, any negative news item should dump the market to the support levels near SPX 1240 that I have indicated. Bonds are still lined up on a buy, but perhaps on a several day delay. Bullish sentiment is rising that is bearish for stocks on a contrarian basis. I have a turning point projected for January 17-18, which could be the low or high.

ES__09_12.jpg
 
Hi Uptrend,

Just an observation regarding your first chart, comparing the S&P and the DAX. It's a 3 year chart, basically setting the price of each index as of this date in 2009 as an absolute zero. It does, indeed, show that the S&P has significantly outperformed the DAX over the last three years. Here it is again, with the Y-axis as a percentage:

big.chart


But if you go back just two years more, to the 5 year chart, you see they are very close:
big.chart

The S&P actually slightly underperformed the DAX in that time. The 10 year chart even shows the DAX outperforming by about 5%. (Don't want to clutter your thread with yet another chart)

So I guess if you give more weight to what an index has done lately, rather than historically, then yes it seems that the S&P is due to lag against the DAX. But maybe it's just been the S&P's turn to play catch up in the last three years, and now they'll move more in synch? Just a thought.

I always appreciate your analysis. Thanks for your contributions!
 
Thanks Sensei for your DAX analysis. Good Stuff!

Here is a view of the VIX after the close today (Wednesday).
It's on reversal watch. The SPX might trade a little higher to about 1310 first. You can see a positive divergence on the VIX, an embedded MACD cross and a higher high today with the slight uptick in the SPX (The VIX should be going down). You can see it is in a resistance zone. Watch this bullish falling wedge.
2012-01-11_VIX.jpg
 
If the VIX continues to fall (16 to 17 would be nice) or even bounce around 21 and the dollar rise a little more this rally should continue. But be ready for a fast ride down the elevator if the VIX or the dollar fails. The only thing that is a little concerning is that the dumb money is outspending the smart money.
 
I have completed my preliminary weekend analysis.

A pullback could be underway, but is not confirmed unless the SPX closes below 1285. The 1289 close today won't do it. If the pullback and momentum continue to shift, then the target is SPX 1258. This is the most probable number. If this idea develops, the top of the next forward wave should end somewhere between SPX 1317-1342. I am expecting 6-7 more days to the low. This lines up with options expiration week.

Meanwhile the Euro should trend lower and carve out an intermediate term bottom around 1.21.

Bonds are starting to get overbought, but have plenty of wiggle room to move higher.

Our friend, Mr. VIX has put in a higher low at 20.91. VIX should trade up to around 26, if this idea unfolds.

Avoid the I Fund; the F fund is now ahead of it for the year! Only enter I when the Euro, US market, and some of the European markets are rising; and that ain't now.
 
Thank you for your analysis Uptrend! I am a little surprised that you expect 6-7 more days to the low. I would think that 2-3 days is all that will be needed to get to 1258. Especially with the Europeans left on the own on Monday? Also the week after next being options expiration week...doesn't that week trend to be positive? Thanks again.
Currently up 0.92% in the F Fund since 12/21/11. :D
 
crommie said:
Thank you for your analysis Uptrend! I am a little surprised that you expect 6-7 more days to the low. I would think that 2-3 days is all that will be needed to get to 1258. Especially with the Europeans left on the own on Monday? Also the week after next being options expiration week...doesn't that week trend to be positive? Thanks again.
Currently up 0.92% in the F Fund since 12/21/11. :D
Click to expand...

Abbreviated week, OpEx, earnings not taking the market (much) higher and this have kept me on the sidelines till it all shakes out.
There IS an uptrend but IMO...momentum is waning.
 
crommie said:
Thank you for your analysis Uptrend! I am a little surprised that you expect 6-7 more days to the low. I would think that 2-3 days is all that will be needed to get to 1258. Especially with the Europeans left on the own on Monday? Also the week after next being options expiration week...doesn't that week trend to be positive? Thanks again.
Currently up 0.92% in the F Fund since 12/21/11. :D
Click to expand...

Ok, the low may come by January 18 (and that is one of my turn dates), although sometimes the market is shifted by several sessions.


You would think the trend would be positive during options X; however the odds are against it when the SPX hits a multimonth high like it did this week. Under this set of circumstances, according to Frank Hogelucht research shows: "The S&P 500 closed at a lower level (compared to the previous week's close) two and three days into option expiration week on 3 out of every 4 (to be exact: on 31 out of 40) occurrences, and closed out option expiration week with a loss on 29 out of 40 occurrences (or almost 75% of the time)". Thease are odds I am not playing, and in fact I like the odds in reverse.

http://www.safehaven.com/article/23973/spx-at-multi-month-high-before-opex
 
Uptrend said:
Ok, the low may come by January 18 (and that is one of my turn dates), although sometimes the market is shifted by several sessions.


You would think the trend would be positive during options X; however the odds are against it when the SPX hits a multimonth high like it did this week. Under this set of circumstances, according to Frank Hogelucht research shows: "The S&P 500 closed at a lower level (compared to the previous week's close) two and three days into option expiration week on 3 out of every 4 (to be exact: on 31 out of 40) occurrences, and closed out option expiration week with a loss on 29 out of 40 occurrences (or almost 75% of the time)". Thease are odds I am not playing, and in fact I like the odds in reverse.

http://www.safehaven.com/article/23973/spx-at-multi-month-high-before-opex
Click to expand...

Thanks again Uptrend! Very interesting stats about OpEx (which is THIS week). I am thinking that as long as Greece returns to the barganing table that the low will be Wed or Thurs. I really hope that an entry point materializes this week as it has been getting more and more difficult for me to be patient while watching the market continuing up. If it continues up on Tues, I will not chase it, but will wait another week...:sick: If the Greek standoff continues then things could get a lot worse, unless the market has this priced in already? :confused:
 
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