FOR TUESDAY: (12/5) Chances are a congestion triangle is forming on stocks and once you recognize the pattern it is rather predictable. We can get away with short stocks into early Wednesday and should get a bounce to get in from. Hoping we can get into short gold also. Scared about the dollar with the budget ceiling finally getting paid attention to.
DEC. E-MINI S & P 500
TRADING RECOMMENDATION: Wait for morning comments.
S & P ANALYSIS FOR TUESDAY: (12/5) Our day trade line sold 2651/2662 and suggested the real damage would be if they broke back below 2649. That worked out well. The congestion triangle pattern is setting up with support at 2628.25 and 2620 and we think by Wednesday morning one of those levels will hold and that will be a retracement. Usually these waves can be dramatic so even a recovery to 2652 is possible before the next push lower. Trade worried about the budget ceiling finally and it’s a concern but we do think it will get resolved, although the Dems may force the issue given their defeat around the tax bill. Chances are the market is a sale on bounce overnight toward the 2650-3 region but we’ll have some exact numbers in the morning.
NEAR TERM: Telescoping nature of the breakout suggests at least two more highs and our projection to 2689 still should come in but will it take until later in the month? Doubt it will happen this week. The chances of a quick stopgap measure for the budget deficit so they can all do Christmas is also inevitable.
OVERALL: We’re seeing at least a 110-point fall from wherever the market stops but not that might even be 2689. It does look like a Christmas recovery will happen the week of Dec. 11-15 and possibly into the Dec. 22. There is not much time to fall but the week of Dec. 4-8 is very possible. It has been suicidal to top pick this market and it’s not due for a final top until June 2018.
CYCLES OVERVIEW: Lower into Wednesday; higher Dec. 10 and Dec. 16.
