S&P 2012-12-19

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.

  1. We see declining  buying control (bearish) that
  2. Is followed by, in the fourth period, a failed sell-off.
  3. In the last period, we see some buying, probably ‘new on close buying’ fills and short covering.
  4. 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:
  1.  the S&P attains the Primary Sell Zone, 1468 to 1458 (basis March), and/or
  2. 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

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