A week ago we talked about markets that were “itchin” to go somewhere. Well, they’ve managed to bleed up some to the point where both the SPX and INDU are on the precipice of an upside breakout…or a breakdown.
Yes, funny as that sounds, the broad indices are at a point where one side or the other is likely to be called on their bet. If the bulls prevail we’ll see their bet pay off in the form of a near-term test of the triple-top highs set back in Sep – Oct.
Inversely, if the bears prevail then what we are witnessing is a lid being placed on the up-leg that formed off the November breakdown lows. If that does play out, then we are gonna see a retracement to the bottom end of consolidation zones that have existed dating back to August.
Granted, the bulls gotta feel they are within mere inches of grabbin the brass ring and defeating key resistance, with the momentum building for a break that will see the highs challenged in short order. The Christmas through New Year’s period generally offers light volume conditions that would allow them to sneak the broad indices up, as it were.
On the flipside, failure at the current levels and the shorts are likely to be emboldened to go for the knife-twist that would see retracement to the bottom end of the consolidation zone – 1,400 and 13k, respectively.
Moreover, were that scenario to develop, we’d be looking at tests yet again of the 200dmas for each. Now I’m not one that pays or plays particular attention to moving averages, but lots of peeps do key tabs on the 200dma, so failure to remain above is going leave a sour taste in the mouths of many. The question then would be whether we’re looking at a great long-side entry or a signal the November lows are now a magnet on the map…
Let’s don’t get ahead of ourselves…
The one thing crystal clear at this moment is the fact that we remain firmly entrenched in long-standing up-trending channels that date back to the bottoms established back in 2009 in the midst of the financial meltdown.
No matter what resolution we get with the Fiscal Cliff (didn’t honestly think I’d make it all the way through without mentioning it, did ya?) or how things play out as we close out the year and start ’13, those channels are likely to remain in play for some time to come – read that as you may!
For now it’s pretty straightforward – traders patient enough to listen to the market are looking at a short window with some well-defined targets to shoot for… May not seem like clarity to the average person, but to a price-action purist this is the type of opportunity you’re always seeking…just in time for Christmas.
We shall see….