THE DOT - if this turns orange or red be alert

Tuesday, March 9, 2010

More evidence for the top - keep buiding the short position

Some smart observations adding to the evidence that Monday ( exactly one year after the low) is at least an interim high - I say interim only as a matter of relative temp. swings as we are at the same time in the process to create the top of this bear rally. We might with a very low probability make another zigzag but the upside is very limited from here 5% tops and the downside is between 20-50% on a pure arithmetic scale. We have reached the assumed scenario of intermarket divergence as some made new highs already and others came close to the old ones. Today will pretty much confirm or delay the process for a week we have to wait for the close to make a final call.


Narrowest S&P 500 Range in 2-3 Years: Fibonacci Time Cycles & Volume Analysis

" The bull market turns one on Tuesday having surged almost 70 percent from its 12-year closing low on March 9, 2009. History shows that by simply passing that 12-month threshold, it will make it that much more rare for the advance to suddenly end. " - CNBC

Historical performance does not guarantee future success and we at Fibozachi see no value in such crap analysis that lacks context and quantification ... the S&P first needs to grab a new high before it can tease investors with the possibility of reaching the 1,200 - 1,300 levels.

Interestingly, one of the most unique trading sessions in over two years registered today; exactly 1 calendar year from the March 6/ 9 bottom of 2009.

Between Sunday evening's open and the close of today's session, S&P Futures (ES) registered the smallest High-Low trading range and the smallest range defined as a percentage in well over two years.

Today's 5.5 point trading range (0.48% percent) marks the smallest point-based range since the 4.50 range of 5/7/07 as well as the smallest range defined as a percentage since 10/4/07 (0.44%).

Range-based statistics for both the S&P 500 Futures (ES) and the S&P 500 Cash Index (INX) are presented below.

S&P 500 Futures Continuous Contract (@ES) ~ Range Statistics

*** Note that S&P Futures open Sunday evening at 6 pm (EST) and trade through the Monday session until 4:15 pm (EST); therefore, the trading range of futures is almost always greater than that of the S&P 500 Cash Index (INX). This is why we at Fibozachi find today's extremely narrow ES range a much more important tell-tale than today's narrow ranged cash session.

3/8/10 Range = 5.5 points

5/7/07 Range = 4.5 points

3/8/10 Range as Percentage = 0.48%

10/4/07 Range as Percentage = 0.44 %

INX Range Statistics:

3/8/10 Range = 4.28 points

9/29/06 Range = 4.24 points

3/8/10 Range as Percentage = 0.38%

5/7/07 Range as Percentage = 0.36 %

Fibonacci Cycles & Volume Analysis

Today (March 8th) marked the 21st trading day from the 1,040.75 swing low on 2/5/10 up to today's intra-day high of 1,140.50.

ES Daily 21 Cycle

Today also marked the 34st trading day from the 1/19/10 closing high of 1,145.75, which registered the highest close since the Primary wave 1 (circle) lows of March 2009.

ES Daily 34 Cycle

This confluence of Fibonacci cycles, coupled with the narrowest trading range in several years (as well as a daily doji candlestick just below recent swing highs), should raise some concern for those who remain net long equities. Bulls never want to see an extremely narrow range session following a strong rally because such typically demonstrates a waning of upside momentum that is characteristic of short-term exhaustion.

Further analysis of today's anemic volume (lowest daily tally for 2010) supports this notion of bullish exhaustion.

S&P 500 Futures (Continuous Contract) ~ Daily

ES Daily Volume

SPY ~ Daily

SPY Daily Volume

While S&P 500 futures (ES, E-mini) sit just 1% away from plotting fresh swing highs, those who aren't trading on the Tick and the 2-minute ought be much more concerned with the possibility of equity markets plotting a FNH (failed new high) just one percent shy of their January peak than with what slight gains might lay ahead. And while market bias (like beauty) is in the eye of the beholder, only the hard right edge (the next bar on any chart) knows what the future holds.

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