12-12-2011 outlook

I told you Wednesday I expected any correction to be modest  (which we got Thursday).  Then I told you Thursday I expected Friday to be up with a top range around 1250 (which got exceeded).  So where do we go from here?

The 40TD cycle continues up, but the 20TD cycle is now down.  Given the off setting factor of the 20TD cycle any upside is limited.  I have taken a look at the next 2-3 weeks and I believe we muddle higher.  Some are talking of testing the last highs in the 1290s, others are talking about new highs in the 1300s.  Looking at the DPO for the 40TD cycle I believe both of these levels are too high.  We have about 8 TDs left in the 40TD cycle to the top and IMO there is about 20 points of upside left over that 8 days because the market is trading above where the DPO would project using a daily average from the bottom. 

Here is the next few weeks as projected using a daily chart for the SPX:

As you can see the 40TD DPO is projecting a high around 1277 (a lower high).  Given the influence of longer cycles this is not surprising.  As a confirmation check I also looked at RWM (inverse Russell 2000 ETF) to see what it was projecting and it appears it is not yet bottoming and should bottom around Dec 21-22 just as the SPX is projected to top.  Here is the RWM:

Given this - volatility should abate and the VIX decline into the Dec 21-23 time frame.  I suppose this makes sense in that we probably will not be getting a lot of news/rumors out of Europe for a while now that they have a plan for a plan.  Also there are several data points to be reported over the next few days and unless they are horrible (which I do not expect) there may not be much to move the market either way.   IMO it is too late to go long on a swing trade and too early to go short (I expect to be sitting on the sidelines making no moves).

So how about Monday?  We have the 40TD cycle up and 20TD cycle down as previously mentioned.  The 10TD cycle is up.  The 5TD cycle is topping and the 2.5TD cycle bottoming during the day.  This should give us a slight upward bias for the day.

Here is the swing cycles for the SPX:

 GL traders.  Relax, don't press to make a trade and enjoy the holiday season.