Wednesday, August 18, 2010

S&P 500

Last night I stated that the S&P may only rally 'to the 1099-1101 area, and then turn lower', at which point 'the market will be sending a strong signal that the internals are incredibly weak .' Tuesday's high was 1100.14 before selling off in the last hour. A case can be made for an a-b-c correction being complete.
The chart below shows this possible scenario--however--the Tuesday's peak at 1100.14 may be only the 'a' subdivision of the corrective wave with the 'b' commencing during the last hour. This would mean that a 'c' is still to come--which could bring the S&P up to the 61.8% (1106-1107) retracement level before turning down. (Note: The market is entering a Energy Date window)
If and when the 1069 level is taken out, the decline will likely accelerate in a dramatic fashion. The resultant damage may shock even market veterans.
At this point. aggressive traders have the opportunity of putting to use some fairly distinct risk-reward parameters to either add to existing positions or to initiate a trade.

Note how the 21, 55 and 200 exponential moving averages have converged at 1096-1098--near today's resistance. The market is coiled like a 'set' trap ready to spring close and ensnare its victim(s).



GOLD
Last night I discussed the benefit of trading multiple contracts in order to realize some profits at significant harmonic points in the time-price structure. Tuesday's DOJI lends evidence to the fact that the Gold price may be at such a juncture.


Cdn. Insurance Companies.
Here are two interesting charts--Sun Life Financial Services and Manulife Financial Corporation. These are two Canadian-based international financial services company that offer a diverse range of insurance and investment products.
While MFC.TO has been in a serious decline for several months, SLF.TO has recently broken support and appears to be taking the same trajectory as its competitor.
These charts tell me that there is something very pernicious going on in this industry which could easily escalate throughout the financial community. When the soldiers begin to fall en masse, it is not long before the Generals order a retreat.

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