Rebel Traders – Analysis Without The Hype

While not the most popular technical indicators in the chartists toolbox, A Fibonacci Time Series analysis does occasionally provide food for thought. Especially on the two S&P 500 charts shown below.

(click on image for full size)

The close of this weeks trading now makes 5 weeks the major averages have been trading in a sideways pattern. Relentless day after day of ending right back where we began. Since the beginning of November the S&P 500 (cash index) has been in an up and down range of 1.9%. Reminds me of Groundhog Day.

Today’s final tally was:

• Dow Industrial Average +75.67
• Nasdaq Composite -0.55
• S&P 500 Cash +4.06

The Dow Industrial Average was carried today by Alcoa (AA) which was up 8.2% on the day.  The technology heavy Nasdaq failed to join the rest of the intra-day party.

S&P 500 (SPX) – Area highlighted shown in chart below

Five weeks and all we have is a 1.9% range.

Today’s damage to the markets began in the early morning hours when the currency markets went crazy. The Euro sank, the US dollar rose, and the S&P 500 futures declined significantly.

All of this action left the S&P 500 in a state of “uh oh”

Some significant damage was done this day…

S&P 500 E-Mini

The following chart is of the S&P 500 E-mini futures (hourly chart). The bottom of the channel remains a very important level.

As of this moment the market is trapped between 1055 and 1070..

S&P 500 Futures Chart - Hourly Scale

Can this be the week that we finally arrive at the top… Hourly chart of the E-mini’s looking a bit ‘toppish’ here at this moment. Stay tuned

S&P 500 E-mini futures

…Or are you now concerned about chasing your holdings downhill trying to get out. I did tell you that the smart traders always sell into strength, not when the market begins to break down because then you are running downhill trying to unload.

Today’s significant decline in the market printed some rather important changes to the dynamics of our markets. If you are still considering ‘buying the dips’ you better respect the charts before you put another quarter in the slot machine, or you may end up like Mr. Franklin Gibbs.

Franklin and his wife Flora go to Las Vegas, Nevada because she won a competition. He detests gambling, but his wife is excited about their vacation. Franklin is given a coin by a drunk man at the casino, who makes Franklin use it in a slot machine. He wins and tells his wife that they should keep the money and not lose it back like the other people.

As they depart, Franklin believes he hears the slot machine calling his name. He continues to hear this as he tries to sleep. As he imagines his winnings piling up, he decides to try his luck, telling his wife he cannot keep “tainted” money, and that he is going to get rid of it by putting it back in the machine. Later, Flora goes to the casino and finds him playing the machine obsessively. Addicted, Franklin has lost a great deal of their money. When Flora tries to coax him to stop, Franklin declares that he has lost so much, that he has to try to win some of it back. He becomes enraged when she presses for him to leave, declaring that the machine is “inhuman”, that it “teases you, sucks you in.” Others observe that he has been playing the machine for hours.

Eventually, the slot machine takes his last dollar and breaks down. Franklin begins yelling and attacking the machine to give him back his “last dollar.” He is taken out of the casino screaming. Later in bed, Franklin tells Flora that the machine was about to pay off, but deliberately broke down so that it wouldn’t have to. He then hears the machine again calling his name. He sees it coming down the hallway to their room, “chasing” him, but Flora cannot see it and believes that he is going crazy. When the machine continues to follow him, repeating his name over and over, “Franklin, Franklin, Franklin!” he backs up towards the window, his hands over his ears, finally crashing through the glass and falling to his death. The police stand over his body, noting that his wife had stated that he had not slept in 24 hours. A casino manager comments that he’s “seen a lot of ‘em get hooked before, but never like him.” The last scene shows Franklin’s last dollar rolling up and spinning out flat near his outstretched, dead hand. The camera pans over to the direction where the coin came from and there sits the slot machine “smiling” at him. (From Wikipedia)

In case you don’t recognize the story quoted above;  it was a story presented in an episode of the 1960’s television show ‘The Twilight Zone”

Will have the full wrap in tonight’s video.

S&P 500 Chart

The following chart for the S&P 500 e-mini’s shows that we are currently sitting on the edge of a cliff. Today’s levels to watch remain 1035 on the low side, and 1045 & 1057 on the high side.

S&P 500 E-Mini (Hourly Chart)

It did not take long for the S&P 500 Futures to break the 1050 levels following the lower home sales data. Next level to watch is 1038 to 1045

S&P 500 E-Mini

Prices to watch for today are 1050 on the low side, and 1068 on the high side…

S&P 500 E-mini - Hourly Chart