FOR WEDNESDAY: (1/4) Typical New Years fake-out day where obviously buying is met by wild selling. It confirms our more bearish forecast for stocks with lower stocks into Jan. 12 and a retracement on the dollar to at least 101.48. We should get wild congestive patterns that will make it unclear to trade and not obvious but we have to assume that the fade is on. Healthy for it to happen after the run-up. Often we get a lot of crazy congestion before employment report, and the first week of the year is crazier than usual so may be hard to position trade anything unless you have perfect entries.
MARCH E-MINI S & P 500
S&P ANALYSIS FOR WEDNESDAY: (1/4) Market stalled at the 3-wave rally target and that’s a bearish sign. We did make some money selling the 2257 region. That leaves open a stronger chance to see 2208-2213 before the market is done but much over 2263 and it won’t happen. Cycles are weak into Friday and the 2235 gap is inviting very short-term. The friendlier pattern would suggest a recovery to 2265-70 first but we’re skeptical. We have a bias toward sales into Friday as profit-taking continues.
Cycles are at odds with many pointing higher into Friday and one major one pointing lower. If the market struggles under 2260, then it would be possible for another 5-wave fall to 2208-2211 but that might take until Jan. 12.
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 2160 this month. We’re all still reeling from the January 2016 correction.
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.
