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On the last trading day of the year, its common for the media to look back over the last 12 months. I wanted to close out the year looking back a little further. From a big picture perspective the charts above continue to suggest that longer-term falling resistance lines/channels remain in place, having a large impact on the markets in 2011.
For 2012 to reflect higher prices, resistance has to be taken out!
@ Stemphos We are in a Kondratieff winter. Usually last around 20 years. If you consider the peak to be in 2000 then that would give until 2020ish. The rally from 2000-2007 was completely fake. Chart the DOW in gold or Australian dollar to see what I mean.
Look how far we have to delever before we hit a place where consumers can start leveraging again.
I just wanted to add that going back to the 1960s, every time that the primary trend line (support line) has been eclipsed to the downside, there has been a ~1.5 to 2.0 yr bear market. Of course, you have warned us on several occasions that the market was changing.
The latest major trend line started at the 2009 lows. The market found support along this line in July 2010, August 2010, and at the end of June 2011. Shortly thereafter a new trend line started.
Based on history we could be at ~850-900 on the S & P before we see a bottom (November 2012 to May 2013)
This is an estimate based on history. Interestingly, there appears to be no trend line break from ~1980 until ~2000. Now we are clearly in a down trending channel as you have so eloquently noted. Could we be in for a really rough ride until ~2020?
Gratefully, we have the Power of the Pattern to guide us along the way.
Hi Chris. Thanks for another awesome year of charts. Any updates to the giant flag pattern that had formed in the S&P? From what I can tell we look to be breaking out on a weekly basis or right at resistance.
Michael…good comments….Yes sometimes it does become a John Denver “rocky mountain” high issue! 😉
@ greg I see. Managing my pwn emotions is tough enough. Good luck! I remember that gold double top with RSI decling from 80’s to 60’s. Made a nice chunk of change on that short. Seems to me you are using leveraged ETFs. The markets been insanely choppy this year. That tends to lose money on the leveraged ETFs even if you are right on the general direction. Did you see the new ETNs OFF & ONN? I have been using them lately. Pretty straight forward.
I really appreciate your work and have profited. I do have to smile at comments on breaking resistance lines required to be higher. Isn’t that like saying we’ve got to get higher if we’re going to be high? 🙂 Actually, you really do good work.
I’m a long term buy and hold investor in VXX, ZSL, SDS, and TBT. For some reason my account keeps dropping! Lol jk, year is ok. I’m on the retail side and regardless of what we do, good or bad. The headlines and volatility get the client very bullish at tops and vice versa. Managing other people’s emotions in a market like this is difficult and draining. Especially when you can’t talk them out of a bad idea (like gold at $1900). There is just no joy there when you see people buying when Chris is shouting TOP from the rooftops.
cjk…a few of the funds are moving above their 50EMA, will see if they move higher and deserve a partial ownership soon.
@ Greg. This must have been a bad year for you. Personally I would short every rally using non leveraged inverse ETFs until QE3 arrives. then go long until that ends and then short again. Just keep it simple and non leveraged. Sleep well and profit.
High yields in 2012 $!?
Agree with Greg – market behavior since early August certainly feels like bear market behavior. Were it not for the late November central bank heroics, this market would be leaving the year clearly negative. That would actually be a more bullish result for 2012. Secular bear market history suggests strongly that odds favor a negative 2012, especially if 2011 ends positive for the S&P. Getting a 4th consecutive positive year during a secular bear market is almost a zero % chance. Chris frames it well, I think. We are not out of the woods and should remain cautious, especially here at resistance and turning into a new year. This market has faked breakouts on specific indexes more than once, only to turn tail and run down again. no fun – thanks for all the great help Chris!!
I like the outlook Chris but I must say that I continue to reduce position sizes. Just look at QQQ for the year. Look at the massive gaps, wicks and reversals all over the place! A breakout may occur and we may exceed 2011 highs but I am taking everything with a grain of salt as that level of volatility and bi polar behavior is not a staple of a healthy organic bull market.
Just end of year venting and not aimed as a negative towards you! Thanks for ll you do.