FOR FRIDAY: (1/6) Friday’s employment report may not have much impact but China overnight may mean a lot more. The January employment report is often robust with Christmas hiring and that should allow a recovery for the dollar and could lead to a breakout on stocks. Our work had suggested lower stocks and crude and dollars into Friday and then recoveries next week. Next week seems complicated and we sense that some new wild news will have an impact but we aren’t totally clear on it yet.
MARCH E-MINI S & P 500
S&P ANALYSIS FOR FRIDAY: (1/6) Market failed to get to 2270 overnight or yesterday and it still isn’t out of the question. Market held key support at the 2253.50-54 region we mentioned in the morning. There’s a new pattern that could emerge and is favored in cycles and patterns suggesting a wild congestion very short-term between 2225-2268 and then a breakdown next week to 2175. That would go with some of the weaker cycles we had seen into mid-January in our monthly newsletter. Still, that pattern doesn’t negate new highs 1st quarter but allows us to work off overbought conditions. Much above 2273 and the market will signal 2295 and negate the last congestive pattern. As always we usually have to wait for the reactions of the computer ALGOS and then play accordingly.
OVERALL: Cycles are at odds with many pointing higher into Friday and one major one pointing lower. While new highs are coming in 2017, the issue is will we get some complicated topping-wedge pattern, which might allow a deeper correction in January to 2175 this month.
BIG PICTURE: Patterns suggest two new highs to 2300 and 2330 into early January before we really have to worry about a 100-point pullback that may happen into the spring. Unless there’s something really wild coming, our focus for swing trades will be to buy a pullbacks.
WEEKLY CHART: We still would expect new highs toward 2296 with additional resistance at 2330. It would seem that 5-wave up from the election low would be complete at 2330 and set up larger fall. Eventually we might get a 110-point correction from 2330 to 2220 and could take a few months which we need to confirm in the cycles. That means that much of the fun of the current rally will be over soon. Daily cash charts starting to project 2300 and weekly charts 2335. We have a bias for higher prices from FOMC into Dec. 22 but we’re not clear how long it will take to do the last push up to 2330. Could be as late as Jan. 7.
MONTHLY CHART PATTERNS: 2420 or 2520 isn’t out of the question before this bull market ends and it takes a long time to turn an ocean liner around in so V-tops and crashes are not to be looked for and publications that steer you that direction are being too sensational.
CYCLES OVERVIEW: Volatile Friday.
