Sunday, December 11, 2011

12-12-2011 outlook

I told you Wednesday I expected any correction to be modest  (which we got Thursday).  Then I told you Thursday I expected Friday to be up with a top range around 1250 (which got exceeded).  So where do we go from here?

The 40TD cycle continues up, but the 20TD cycle is now down.  Given the off setting factor of the 20TD cycle any upside is limited.  I have taken a look at the next 2-3 weeks and I believe we muddle higher.  Some are talking of testing the last highs in the 1290s, others are talking about new highs in the 1300s.  Looking at the DPO for the 40TD cycle I believe both of these levels are too high.  We have about 8 TDs left in the 40TD cycle to the top and IMO there is about 20 points of upside left over that 8 days because the market is trading above where the DPO would project using a daily average from the bottom. 

Here is the next few weeks as projected using a daily chart for the SPX:

As you can see the 40TD DPO is projecting a high around 1277 (a lower high).  Given the influence of longer cycles this is not surprising.  As a confirmation check I also looked at RWM (inverse Russell 2000 ETF) to see what it was projecting and it appears it is not yet bottoming and should bottom around Dec 21-22 just as the SPX is projected to top.  Here is the RWM:

Given this - volatility should abate and the VIX decline into the Dec 21-23 time frame.  I suppose this makes sense in that we probably will not be getting a lot of news/rumors out of Europe for a while now that they have a plan for a plan.  Also there are several data points to be reported over the next few days and unless they are horrible (which I do not expect) there may not be much to move the market either way.   IMO it is too late to go long on a swing trade and too early to go short (I expect to be sitting on the sidelines making no moves).

So how about Monday?  We have the 40TD cycle up and 20TD cycle down as previously mentioned.  The 10TD cycle is up.  The 5TD cycle is topping and the 2.5TD cycle bottoming during the day.  This should give us a slight upward bias for the day.

Here is the swing cycles for the SPX:

 GL traders.  Relax, don't press to make a trade and enjoy the holiday season.


  1. Right or wrong I think this is one of your best posts in weeks. Thanks

  2. Tkx Tom -

    Can't always find the time during the week to do more detailed posts. Had been spending time on the longer term outlook posts for this weekend the past several days so less time than usual.

    I sometimes find it difficult to present the information in a precise manner that is easily understandable (at least I hope is understandable)for your average reader.

    Glad you are finding the Hurst book interesting. The last half gets in to more complex areas (regression analysis, Fourier series) which you may find over your head unless you have a math or engineering background.

    But I believe the first part is understandable even if you don't have a technical background. I intentionally avoid dicussing these more complex techniques as I believe they would not be understood by most. I try to KISS (Keep It Simple Stupid) so my readers can duplicate my analysis for their favorite stocks/positions. There is software available that attempts to incorporate these more complex techniques.

  3. Inlet,

    Absolutely terrific posts. Great job.

    Most of the sites I read today believes that we need to sell off. So, maybe the market does the opposite and we grind higher. Although mathematically your work shows that we can't get to 1300, there could be some end-of-the year euphoria that pushes us to 1300.

    I'm sitting on my hand too, looking for a trade, but just not really seeing anything worth taking a chance on.