BarroMetrics Views: S&P 2012-12-19
It’s the time of year that I usually take off because:
- Market volume starts to thin
- As a result, the volume/price analysis I use tends to become less reliable; and
- This year we have the ‘fiscal cliff’ melodrama.
Speaking of ‘fiscal cliff’: it’s going pretty much according to the roadmap I had painted for myself which called for:
- an apparent narrowing of interests,
- followed by a ‘solution’; a ‘solution’ that merely kicks the can down the road.
The sole question will be how the markets will react.
Technically, for me, the S&P is setting up for a sell.
Figure 1 is the cash S&P that shows the Primary Sell Zone. Prior to or when the ‘solution’ is announced, I do expect to see the zone attained, but I don’t expect to see prices above 1475 (basis cash).
Pity, it would be a great sell if we see prices move above 1501 (basis cash), then exhibit a bearish-conviction close below 1465 (basis cash).
So, why do I say ‘setting up for a sell’? (That is: what are the chances we’ll see acceptance above the Maximum Extension, 1501, (basis cash)?
Looking at the current price action, I’d say ‘not much’
Figure 2 is a chart of Delta’s Footprint chart, E-mini, basis March, daily. You see an increase in the total volume but a decrease of buying control. This sounds a warning of potential weakness.
This idea of ‘potential weakness’ is confirmed by Figure 2. This is the Footprint of Dec 18, split into 5 bars.
- We see declining buying control (bearish) that
- Is followed by, in the fourth period, a failed sell-off.
- In the last period, we see some buying, probably ‘new on close buying’ fills and short covering.
- If the (3) is correct, On Dec 19, we should see early buying in the first 30-min to 90-min.
What will dictate the trend for Dec 19, will depend on:
- if selling comes in (if no selling, I expect higher prices); and
- if selling does in, whether we’ll see selling follow-through.
- As for me, I doubt we’ll see real selling pressure until:
- the S&P attains the Primary Sell Zone, 1468 to 1458 (basis March), and/or
- the ‘fiscal cliff’ is ‘resolved’.
Which means, of course, we’ll see choppy to upward action till then.
FIGURE 1 Daily S&P
FIGURE 2 Market Delta Footprint Daily
FIGURE 3 Market Delta Footprint 5-split