The "50% Fibonacci Sweet Spot"

Below are 4-Hour charts of the YM, ES, NQ & TF. I've drawn 4 sets of Fibonacci fan lines and 2 sets of Fibonacci retracements...I've marked the "Thin Ice Zone" that I spoke about in Monday's post...and I've placed a golden circle where all of the 50% Fibonacci levels (heavy broken blue lines) criss-cross, which I've dubbed the "50% Fibonacci Sweet Spot." This "Sweet Spot" is the level where I believe these markets will need to hold above on any pullback if I am going to be convinced that the rally this week is sustainable in order that we see them reverse the bearish moving average Death Cross formation that they're currently operating under on this timeframe, and on the Daily timeframe.

There is one exception, however...while the TF has advanced above a lesser (grey) "Sweet Spot," it is still below its "50% Fibonacci Sweet Spot"...it's also the only e-mini that hasn't advanced above its "Thin Ice Zone"...therefore, all of my comments above and below hinge on the TF advancing and remaining above its "50% Sweet Spot."

I say this, in spite of the this morning's report regarding the major central world banks shoring up financial liquidity (see my earlier post today for the news article link), and in spite of China's central bank cutting reserve requirements for commercial lenders by 50 basis points, as reported in this news article: http://www.reuters.com/article/2011/11/30/us-china-economy-rrr-idUSTRE7AT0TK20111130 (presumably in anticipation of 2 reports which were released later tonight which showed of a drop below 50.0 of their index based on purchasing managers in the manufacturing industry):  http://www.forexfactory.com/#details_closed=35066 A drop below 50.0 indicates a contraction in their manufacturing industry.

My reason for saying this is because Europe's financial, economic and fiscal problems are still unresolved. Furthermore, I see fiscal stalemates in the U.S. until next year's election is out of the way. However, it would appear that there may be more room for advancement in the U.S. equities and commodities markets given the data released in today's Beige Book report, as well as potential further demand by China for commodities. Therefore, I'm allowing a 50% weighting in favour of an advancement above the "Sweet Spot" until Xmas (also, the Fed should have an idea of where inflation is heading by then and whether it is still within their target rate)...this is, of course, barring any major catastrophe that may arise between now and then, which sends these markets plunging, once again.

However, should the markets fail to remain above the "Sweet Spot," and should the TF fail to rally and hold above its "Sweet Spot," I would seriously question the validity of this week's rally...they would still be subject to the volatile bearish Death Cross influences, and they could very well end up below October's lows. I'm applying a 25% weighting to the chances of a reversal to new lows for 2011, and a 25% weighting to the chances that the markets continue to trade within their large trading range that was established from August.

I'll review these weightings weekly until the end of this year.

What's the colour of Xmas on your planet?

Now that the Beige Book report is out and it shows that "Overall economic activity increased at a slow to moderate pace since the previous report across all Federal Reserve Districts, except St. Louis, which reported a decline in economic activity," will we see a stabilization of price fluctuation on the YM, ES, NQ & TF Daily charts (see my post below)? And will we see a Xmas rally, or will the markets demand something more from the Fed and world politicians to inject further confidence? Time will tell...

You may read the entire Beige Book summary here: http://www.federalreserve.gov/fomc/beigebook/2011/20111130/default.htm

Will we see a green or a red November?

With only 3 hours left in today's, and November's, trading, here's how the Monthly chart looks for the YM, ES, NQ & TF...at the moment, the YM is above November's open of 11910, while it looks as though the others will have to better the following opening prices to close in the green:

• ES - 1247.50
• NQ - 2353.25
• TF - 734.70

With the release of the Beige Book report at 2:00 p.m. EST today, it's possible that these markets could rally to close the month in the green, if the data is very positive...they've been high-basing since today's open after rallying hard in pre-market trading (however, that would require an enormous push on the NQ, but anything's possible!).

The Daily chartgrid below of these 4 E-minis shows that the YM & NQ have already reached their 200 sma, while the ES & TF are on their way...a close and hold above the 200 sma on the YM & NQ would confirm that an attempt to reverse the bearish Death Cross moving average formation is in progress...however, such a resolution would also require the participation of the ES & TF...we may see price bounce around in between the 50 and 200 smas until either an uptrend has begun, with price breaking and holding above the highs of their October highs, or the downtrend has resumed on this timeframe.

Liquidity Solved...Unemployment is Not

The markets soared this morning after this news article was released regarding a coordinated action by major central world banks to provide liquidity to the global financial system as a preemptive strike against rising stresses in the banking system: http://www.reuters.com/article/2011/11/30/us-markets-global-idUSTRE7AK01K20111130

In contrast, there was no negative market reaction to today's monthly data release which showed a rise in the European unemployment rate to 10.3% (its highest level in 11 years), as shown in the graph below (provided courtesy of www.forexfactory.com):

The banks are happy...are the citizens?

The Curve of the 50's

Standard & Poor's cut its credit rating on 37 of the biggest bank in the world today, as reported in this Reuters' article: http://www.reuters.com/article/2011/11/29/us-sp-ratings-idUSTRE7AS2R420111129

Below is a Daily chartgrid of the 4 E-mini Futures Indices, the Financials ETF (XLF), 5 bank stocks, and 2 credit card stocks. The credit card stocks, V and MA, have been outperforming the financials, and the markets, in general, as I noted in my earlier post today...they are trading above their rising 50 sma (red), while the financials remain below their declining 50 sma. The 50 sma and the 200 sma (pink) are beginning to move together on the financials and credit card stocks, as well as on the 4 E-minis...in fact, they almost touched on the NQ last week...a result of a contraction in trending momentum in all of these markets from August of this year...the curve of the 50 sma and its relationship to the 200 sma is something that I'll follow over the next days/weeks...at the moment, the financials and the E-minis are under the pressures of a bearish moving average Death Cross formation, while the credit card stocks are subject to the influences of a bullish moving average Golden Cross formation.

Below is a Year-to-date percentage comparison chart of the XLF with V, MA and the Dow 30 Index. The slowing of the uptrend (and the resultant contraction) is very evident on the credit card stocks from August on this chart...it will be interesting to follow these over the next days/weeks to see whether this contraction continues, or whether they resume their uptrend, in earnest...or whether a reversal comes in...of course, any trending that resumes on the XLF and Dow 30 should also make its appearance on this chart...something I'll check on from time to time.

Below is a Daily (one year timeframe) chartgrid of the YM, ES, NQ & TF. At the right edge of each chart is a Volume Profile for the one year time period [the highest volume (POC) for the year is depicted by the red horizontal line]. At the moment, price is consolidating around a secondary high-volume level, which happens to correspond to the 50 sma on the YM, ES & TF, and it is attempting to form a base from which to advance upwards (possibly towards the 200 sma and even the POC). A break and hold below this level could very well send price back down (and possibly below) their range-bound lows. It may take a large news event to move these markets in one direction or the other from this important level...whether or not tomorrow's Beige Book report will contain sufficient bullish/bearish data to make much of an impact remains to be seen...time will tell where they go from here.

Looking at a slightly smaller timeframe, we see that the YM, ES, NQ & TF are all trading around their 50 sma on their 4-Hour charts, as shown below...a move upward and hold above their 200 sma could resolve the impasse on the Daily chart and send them up to the levels noted above.

However, because they are still under the pressure of the Death Cross formation on both the Daily and this timeframe, they are subject to large and uncertain volatility...so an advance may not be so cut and dried.

Also, whether or not liquidity issues surface from the banks in response to the above credit rating downgrade and the latest round of stress testing announced by the Fed on November 22nd is something I'll watch for: http://www.nytimes.com/2011/11/23/business/number-of-at-risk-banks-declines.html

Consumers confident, eh?

Quite a big jump in the Consumer Confidence numbers today...wish I was as confident...I wonder how high credit card interest rates are going to be raised in January (Visa & Mastercard have been outperforming the Banking Index, and the markets, in general...ones to watch for any signs of weakness over the next few weeks)...

Perhaps they're buying more than just pizza...

Web surfing can be bad for your health...

Market update...no clear (intraday) signals for me, so far...stocks, ETFs, commodities, foreign ETFs are bifurcated...TF remains range-bound from the open.

The "Thin Ice Zone"...YM, ES, NQ & TF

Below are 4-hour charts of the YM, ES, NQ & TF. I've marked the high and low of August 5th (white horizontal lines), which was the day that Standard & Poor's downgraded the U.S. credit rating. Since that time, price has repeatedly tested levels above and below the high and low, with a lot of gaps occurring at the market open inside this zone...it's become a level at which market uncertainty has accelerated.

I refer to this zone as the "Thin Ice Zone," and I've written about it in previous posts. It  has, basically, been a price magnet and has become a trendless zone. Until the markets exit this zone once and for all, with convincing volumes and any gaps filled in, it will remain this trendless and friendless, messy zone, inside which anything goes. At the moment, these e-mini futures indices are, technically, in a Death Cross bearish market formation on both this timeframe and the Daily timeframe. As such, they are subject to further bearish pressure until such a pattern is reversed, with conviction. Today, they advanced up to the 50 sma (red)...whether they continue upward remains to be seen.

Today, the Fitch rating agency affirmed its U.S. credit rating at AAA, but the outlook has been revised downward from stable to negative, as noted in this Reuters' article:

http://www.reuters.com/article/2011/11/28/us-usa-ratings-fitch-idUSTRE7AR28J20111128

Below is a 1-day 1-minute percentage comparison chart of the S&P 500 Index with the VIX. After spiking down this morning, the VIX spiked back up to close the day in positive territory above today's open...a move higher (from the open) of around 0.64% on the day versus around 1.35% on the S&P 500 (a ratio of 47:53). Whether or not this is indicative of growing interest/accumulation in puts is something I'll keep a close watch on over the next days/weeks.

Below is a 4-hour chart of the VIX. Price closed just below the triangle uptrend line and October and November's TPO Profile POC, as well as the triangle apex that I mentioned in Friday's post...it ended a bit on the bullish side of things, compared with Friday's bearish move higher...however it is still trading well within the August 5th high and low (broken horizontal yellow lines), and, as such, is still producing huge intraday uncertain volatility...will see how this unfolds over the next days/weeks.

Citigroup has a date with the courts on July 16, 2012

From Reuters today:

A judge on Monday rejected a proposed $285 million settlement between Citigroup Inc and the top market regulator over the sale of toxic mortgage debt and ordered a trial.

In a written opinion, Manhattan federal court judge Jed Rakoff said the proposed settlement was "neither reasonable, nor fair, nor adequate, nor in the public interest."

For their full article, here is the link:

http://www.reuters.com/article/2011/11/28/us-citigroup-sec-idUSTRE7AR1K020111128

Price on their stock, C, is currently trading below near-term major resistance, as shown on the 4-hour chart below...the last candle, which just closed, has formed a shooting star...will see where price goes from here.

Below is a 4-hour chart of the Financials, ETF, XLF. The last candle formed an outside bearish engulfing candle after hitting major near-term resistance...will watch 12.20 and 12.00 in the short term to see which way price breaks out.

Can the PIIGS have their cookies and eat them too?...

In honour of the PIIGS flying higher today on rumours galore, here is a little something to keep you amused:

http://vimeo.com/staffpicks#27256955

Euro-squeeze

The EUR/USD retested resistance @ 1.34 in pre-market trading today...1.33 is an important support level to hold, as shown on the Daily and 4-hour charts below:

Shrinking Money Supply in Europe

Today's data release on money supply in Europe shows that the last month's supply declined...the graph below shows that supply is only about one-quarter of that at its peak in 2008...it appears that money is flowing out of Europe and the Euro, once again. The data is supplied courtesy of www.forexfactory.com.

Fibonacci Confluence Zones on the ES

Below is a Weekly chart of the ES. On it are four sets of Fibonacci drawings (one Fib Retracement, one External Fib Retracement, one Fib Extension, and one Fib Fan Lines). I've shown Fibonacci confluence zones, if price were to continue falling (at some point), as follows:

1st level: 1068 - 1100
2nd level: 984 - 1020
3rd level: 900 - 936

Possible targets? Yes. Probable? Time will tell.

The Biggest Thanksgiving Week Drop in S&P 500 Index Since 1932

The S&P 500 Index had the biggest Thanksgiving week drop since 1932, according to Bloomberg Businessweek: http://www.businessweek.com/news/2011-11-25/u-s-stocks-cap-worst-thanksgiving-week-drop-since-32-on-europe.html

Further to my post on Wednesday, the VIX closed the week above its triangle apex of 33.80, as shown on the 4-hour chart below...a hold above this level would be extremely bearish for the S&P 500 and could very well send price back down to the October lows.

Below is a chartgrid of the YM, ES, NQ & TF...each candle represents a one-month Options Expiration period. Price on the current candle sits below the middle Bollinger Band on the YM, ES & TF, while it is immediately above on the NQ...whether this candle continues downward for the duration of the current OPEX period remains to be seen...but, at the moment, the momentum has a bearish tilt to it, and price could very well travel to the bottom Bollinger Band at some point before pausing.

Below is a Monthly chartgrid of the YM, ES, NQ & TF. Price on the current candle sits below the middle Bollinger Band on all 4 e-mini futures indices. The same comments apply as noted above.

Below is a Weekly chartgrid of the YM, ES, NQ & TF. Price on the current candle closed below the middle Bollinger Band on all 4 e-mini futures indices. At the moment, the momentum has a bearish tilt to it, and price could very well travel to the bottom Bollinger Band by the end of next week to form a Three Black Crows pattern (which is bearish).

Below is a Daily chartgrid of the YM, ES, NQ & TF. Price broke below the neckline of H&S pattern on all 4 e-mini futures indices...and has fallen below its price target on the NQ and below near-term support...whether it snaps back remains to be seen.  At the moment, the momentum has a bearish tilt to it, and price could very well travel to the respective H&S targets on the YM, ES & TF before pausing...bringing the NQ down further, as well.

Below is a 4-hour chartgrid of the YM, ES, NQ & TF. Further to my post on Wednesday, I would note that the 50 sma (red) has, once again, crossed below the 200 sma (pink) on the YM to re-form a Death Cross (which had already been re-formed on the other 3 e-minis)...this is a confirmation of the bearish downtrend that began in July of this year...whether or not price returns to retest the 50 sma before resuming its downward trek remains to be seen. A helpful gauge of direction will be a close observation of the VIX.

The US $ is poised to make a run for regression channel confluence at 81.00, as shown on the Daily chart below. If price can break and hold above 80.00, it has a good chance of reaching that target.

Below is a Weekly chart of the EUR/USD forex pair. Price has fallen below a (blue) diamond apex and looks poised to fall to its lower edge where there is confluence with the -1 deviation level of a downward-sloping regression channel at 1.3000.

With respect to the EUR/USD, I'll be watching the European Financials ETF, EUFN, for confirmation of continued weakness, or otherwise. Below is a Daily chart of the EUFN. Price is set to break below its all-time low of 13.64. There was a large volume spike on yesterday's candle, which indicates a much larger than normal interest in this ETF...definitely one worth watching.

Below is a Weekly chart of the Financials ETF, XLF. Price looks poised to continue its downward momentum to a H&S target of 10.50.

Below is a Weekly chart of the Emerging Markets, ETF, EEM. Price looks poised to drop further to a confluence level around 35.00.

Below is a Daily chart of Oil. Price has been bouncing in between Fibonacci levels and could go either direction next week.

Below is a Daily chart of Gold. Price has also been bouncing in between Fibonacci levels and could go either direction next week.

Below is a Daily chart of the Commodities ETF, DBC. A drop and hold below 26.25 could send price down to a regression channel confluence level of 23.70...this is a chart I'll be watching, along with Gold and Oil, to see who influences who, if at all, over the next days/weeks.

In conclusion, it appears that downward momentum is building in the markets, in general...it would take a very large and concerted effort to stop it at this point. Unless something extremely positive emerges in the news over the weekend, I'm not expecting this decline to abruptly end on Monday/next week...I'll be watching the VIX closely.

Why I like the metric system...

Amazing Grace sung by Wintley Phipps...simply amazing...

The following information is being circulated via e-mail, and a dear friend forwarded it to me:

At Carnegie Hall, gospel singer Wintley Phipps delivers perhaps the most powerful rendition of Amazing Grace ever recorded. He says, "A lot of people don't realize that just about all Negro spirituals are written on the black notes of the piano. Probably the most famous on this slave scale was written by John Newton, who used to be the captain of a slave ship, and many believe he heard this melody that sounds very much like a West African sorrow chant. And it has a haunting, haunting plaintive quality to it that reaches past your arrogance, past your pride, and it speaks to that part of you that's in bondage. And we feel it. We feel it. It's just one of the most amazing melodies in all of human history." After sharing the noteworthy history of the song, Mr. Phipps delivers a stirring performance that brings the audience to its feet!

Here is the link to his performance:
http://www.karmatube.org/videos.php?id=1312

This song holds a very special meaning for me...it was played by a firefighter bagpiper at my best friend's funeral many years ago...the funeral was attended by our local firefighters in full dress uniform...something that is reserved for one of their own...even though she wasn't a firefighter, she was an associate member of their club and was loved and respected by them for her fun and very upbeat nature...she couldn't have been given a higher honour.

Thanksgiving Facts...The Beginning and Now...

These fun facts are provided courtesy of www.infographiclist.com. You can click on this link to see a larger version: http://infographiclist.com/2011/11/23/thanksgiving-day-infographic/

VIX, YM, ES, NQ & TF

Below is a 4-hour chart of the VIX. It closed the day above the Monthly TPO Profile POC (red horizontal line) of 32.32 (the same level applies for both October and November). It also closed just above a triangle apex at 33.80...a hold above this level would be extremely bearish for the S&P 500 and could very well send price back down to the October lows.

Below is a 4-hour chartgrid of the YM, ES, NQ & TF. The 50 sma (red) has, once again, crossed below the 200 sma (pink) on the ES, NQ & TF to re-form a Death Cross...this is a confirmation of the bearish downtrend that began in July of this year...whether or not price returns to retest the 50 sma before resuming its downward trek remains to be seen. A helpful gauge of direction will be a close observation of the VIX.

Below is a 1-day 1-minute percentage comparison chart of the Dow 30, S&P 500, Nasdaq 100, and Russell 2000. The Russell led today's weakness, and, by the end of the day, the Dow shot down past the S&P and the Nasdaq to finish second in weakness...whether or not the downward momentum accelerates on the Dow to propel it into the daily leadership weakness category again is something that I'll continue to monitor (it led in weakness on Monday and Tuesday this week, as shown on the  next 2-day 2-minute percentage comparison chart)...also, see my post on Monday in this regard...in addition, I'll watch for a Death Cross of the 50 & 200 smas to re-form on the YM 4-hour chart to confirm weakness in the Dow.

I wish you all an enjoyable and safe Thanksgiving holiday.