11-28-2011 outlook

The half day Friday continued to show weakness.  As we all know the market does not go in one direction, but will reverse at some point.  I believe that point will be reached as early as Dec 1 (could be earlier), but my work indicates it should be Dec 1 or Dec 2.   I will be getting rid of all my short positions (QID and RWM) while I have profits.  I also will be buying back covered calls I wrote on my long positions at a nice profit.  I expect by Dec 2 or Dec 3 I will be adding to my long positions (have to see how the market acts by then). 

Took a look at some EW blogs and they seem overly pessimistic to me talking about lows in the low 900s on the S&P.  Not saying we won't get there, just that we should see a very tradeable bounce in December.  Looked at some other blogs and some of them are talking about the low 1000's.  Again seems overly pessimistic to me.  So I took a look at the S&P.  We have the shorter cycles that should bottom around Dec 1.  We have the 20 week Wall cycle which should bottom by mid December.  The most pessimistic projection is the 20 week Wall cycle (DPO estimate) showing a low around 1130.  Here is that chart:

Could we over shoot 1130 and see lows below that.  We absolutely could.  So we watch the market and adjust expectations as the market dictates and be ready to buy any big dips after Dec 1.  I doubt we will see the 1000 area though - much less 900 near term.

The outlook for Monday is for some continued weakness.  We may see reduced volatility.    We have the 22.5TD cycle and 11.25TD cycle are down.  The 2.8TD cycle is bottoming.  The 33.75TD cycle and 5.625TD cycles are up.  Overall these cycles cancel out.  The 20 week Wall cycle is down.  So the bias is down.

Here is the SPX swing cycles:

GL traders.  Do your own analysis.  Watch for the change ahead.