At the end of this Monday 31/12/2007 will be the last day of trading for 2007 completing an eventful year. It also shifts major timeframe levels in all global markets.
The major timeframe being the Yearly or the ‘Primary timeframe’.
Above is the Weekly chart of the S&P cash, what this chart is showing is the Yearly timeframe dynamics along with certain levels around the 3-month lows that often act as support.
We can see the rise up into 2006, continue higher into 2007, and now the upper resistance in 2007 will shift much higher, so any further upside in 2008 will have a higher timeframe path to travel towards.
The red line is the Yearly balance point, and we can see that price is going to open right on ‘fair-value’ for 2008:- Above fair value and expectation that S&P is moving higher, and below it is moving back into major support and the 3-month lows once again
When we look at the monthly charts of the S&P cash market, we can see how this Yearly balance point is a major trend guide each year; on the way up, and on the way down.
The only recent time below the Yearly BP was a 2-week sideways pattern in 2005, before the trend resumed higher.
A lot of traders are calling ‘bear’ markets for 2008, using my model a bear market definition can’t occur until price is trading below 1393 in 2008, and if that is the case then the expectation is that price is heading back down into 1210. (2-year pattern)
However, over 100 years of decade cyclical patterns every year ending in ‘8’ has been up. Does that mean 2008 will be up?… Who knows
Fundamentally things aren’t looking great, talks of recession in the US, and the housing crisis yet to filter right through the economy, the market might not fall over but we could have another congestive-sideways pattern like in 2000 before things fall over in 2009.
In conclusion:- YearlyDynamic highs in 2007 stopped the market rising higher, resistance shifts in 2008, so the S&P can make higher highs in 2008. (resistance disappears)
The Yearly balance point:- of 1469 is going to define the larger trend in 2008. (Cash Market)
DOW CASH market is the same:- 13157 is the Primary trend guide, with major ‘fair-value’ around 12500.
We can also see that 2007 resistance will shift higher, so that any UP trend in 2008 can move much higher in 2008. Or much lower if it breaks 12500 confirmed with a Monthly close below this level.
DOW Futures:-This week’s expectation was a lower Weekly close, this was confirmed by the failure of the 3-day lows on Friday. A lower Weekly close this week, has the potential to send the market down into another lower Weekly close.
And at this stage with price trading below all higher timeframe 50% levels and the 3-day SELL cycle, my expectation is that price will be under pressure early next week.
Looking for a push down into 13304, a break of this and expectation that next Week will push much lower. There are ‘Drops’ in the forward Weekly timeframe which also favours further downside.
Note: any push down next week will see markets down towards the Yearly BP @ 13157
E-mini Futures:-There is a slight difference on the E-mini:- even though all short-term indicators are ‘SELL’, futures market isn’t that far away from the Yearly BP (1469)
The level which is critical on E-mini is 1472:- A bullish set-up would be to bounce off this level and ‘HOOK’ back inside 1492. (January 50%)
Trend:- Bearish below 1492 (January 50%)
Trend guide 1469 :- extremely ‘bearish below; 1469 (Yearly BP)
DOW and E-mini intra-day..On Friday the DOW failed at the 3-day break and moved down into support, E-mini followed the pattern lower after an early push upwards before the Weekly trend pushed it back down into support.
When there is a divergence of both channels into ‘dark-blue’ the breakout is much more valid.
Short-term trend defined by 5-day 50% level for Monday
In conclusion:-
Short-term the trend is defined by January 50% levels, and breakout of the lows on Monday @ 13338 and 1477 is extremely bearish.
A bullish pattern early in January would be to see a push down into support based on the ‘Yearly BP’ in both markets and then bounce back above the January 50% levels….
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