Sunday 13 January 2013
We have a price target for the S&P e-Mini: the 1482-1488 area. That area is
derived from Point and Figure, [P&F] used to measure market “energy,” or the
potential target that price can attain in a directional move. The market is already in
an area where it can fail. The one caveat to any analysis pertaining to the stock market
is an inability to assess market interference, [manipulation] by the central bank/Wall
Street firm[s], doing everything possible to defy market gravity, and succeeding.
There were clear signs of a market sell-off, that began in earnest, starting in 2008.
What was not known then was the extent to which the market would collapse. This
is exactly why the Fed/Wall St has been intervening for the past year or two. They
want to prevent the inevitable, inevitably making it much worse when reality is
allowed to function without the artificial stimulus. Never underestimate central
planners with access to unlimited fiat to boost prices.
The monthly closings in November and December, 2007, and the January high of
2008 are circled on the chart to see why the 1483+ area is potential resistance. When
the P&F target area of 1482-88 is added for consideration, there is a price target
synergy that merits heeding.
The resistance we mention remains potential because it must first be tested, and price
must then fail, in order for a change in trend to be confirmed, and that change can be
from up to just sideways. One does not act immediately upon this information by exiting
long positions or establishing short positions, especially the latter. Price could stall at,
and then proceed higher, or it could simply sail through that level and enter the 1500+
area. There must always be a reason for taking any action.
We rely more on horizontal support/resistance lines than trend lines because the
horizontal lines are drawn from previous swing highs/lows where we know price failed
at a specific area. We do have an upslanting converging triangle to show another form
of potential resistance, and it happens to coincide with the horizontal and P&F numbers,
giving a third independent tool for analyzing the market.
On the monthly chart, there is price synergy, but it ends on this chart. We did cover the
importance of market synergy in our recent analysis of AAPL, when it failed at 700.
For a comparison, see http://bit.ly/WB2vUk.
Contract changes account for the price differentiation in highs over various time frames.
Current weekly price is under the monthly resistance level. The September high is the
resistance area where price closed on Friday. This leaves more leeway for how high
price can go on the weekly chart, and the room indicated by the channel shows just how
much price can rally over 1500 before meeting channel resistance.
For the complete article and more charts, visit our site, http://bit.ly/V1QCwi
