Wednesday 28 December 2011

Nightly Report. December 28, 2011

I am kicking myself at the back for violating my own trading principals. I have been writing for the last three days that a correction is expected and necessary for further up move. And yet I did not take profit and re-enter at a lower level like I did during the last pullback. Most likely I was complacent or I did not properly estimate the size of the correction. Just proves that every now and then the market shows you who the boss is. We all do our song and dance to win the heart of a fickle sweetheart but there is no guarantee. One momentary lapse of concentration, one deviation from the trading principles and we end up flat on the back. Luckily for me, there was no actual loss, but I feel that I have missed out on an opportunity.

Two things I was and am fairly confident of. I believe SPX will be near 1300 or exceed it during this cycle and a correction was needed / on the way before we reach that target. So now that we have the correction, next four days should be in line with the projection. I work with many parameters. Cycle analysis, TA, sentiment analysis, liquidity flow, market noise analysis, and different time frames and so on, so forth. So far, notwithstanding the 1.2% correction in SPX I think we are on course for a high next week.  The correction of today should not derail that conclusion. Let me present few TA which everyone can apprehend.

First the daily chart of SPX.

It seems the correction stopped on the sloping tend line.

Next is the NYMO.

We have drawn another trend line through the sloping tops of the NYMO and here also the correction has stopped well above the line.

NASI is showing that the trend is intact.

Also let us look at the seasonality factor again.

I will be drawing your attention to this chart few more times next week as well. As you can see, the market behavior is consistent with the seasonality factor. There were no external factors disturbing the market today. This correction was totally expected and now we can move forward. I will continue with my analysis and I will come back with further post at night if I think I have found anything serious which will make me change my mind about the market tomorrow.

Also remember, today was a Major Distribution Day and in the normal course the day after is green. Add to that the seasonality factor.

Last thing for the day is gold. If you recall my last post on gold ( ) I mentioned that if GLD breaks the long term trend line, there may be additional problem for gold.

As you can see, GLD broke that line today, although still half in. And it is much oversold. So again, we may see some near term bounce but when the stock market tops next week and starts major correction, we may see more downward pressure in gold.

Once again, thank you for following me in Twitter.(@BBFinanceblog) I know lots of you have  great following, so please retweet to your friends and followers. Let more people benefit. Visit regularly and profit from the World of Finance.


  1. Thanks for all your analysis. I really enjoy your perceptive and level headiness on the markets. Not to mention your timing. Since I started following you has been impressive. Would love to know how you do it. Thanks again for all your hard work.

    Loyal follower

    PS Is it to soon to go long again?

  2. Thanks for reading my blog. I am long from December 19. My analysis shows a top next week and so I see no reason not to be long now. More so after the correction which I was expecting for the last few days.
    If I find something different I will post immediately.

  3. Great work! I am learning a lot and your rational approach is inspiring

  4. Just discovered this blog today. This is the kind of focused analysis I look for. I've added this site to my short list of required nightly reading. Keep up the good work please.

  5. Just discovered this blog today. This is the kind of focused analysis I look for. I've added this site to my short list of required nightly reading. Please keep up the good work.

  6. I still am curious to learn what tools or techniques tell you that we are in an uptrend still and that the dip should be bought. This is the area of TA that really confuses me - for every indicator that says top, there is one that says its not a top or that its subjective to interpretation. What is your advice for learning to call the turns and stay with the trend as effectively as you do?

    thanks. If this is proprietary, I understand. Just insanely curious to learn!

  7. BB, THank you for all of the work that you put into this. I have a question about the correlation between US$, other currencies, US Treasuries and Gold/Silver with respect to SPX index. It appears that correlations are made at times and they are ignored at other times..

  8. L_T, Thanks.
    rippy41, There are no TA techniques for cycle analysis. Some of these are my proprietary indicators developed over years. I really have no advice apart from doing it everyday for at least 10,000 hours before you can get a hang of it.
    Anonymous, Yes over time the correlation changes. That is the effect of long range macro economic influence. There is no way to predict it. We just have to look out for the correlation or lack of it.