Since the late November 2009, artificial behavior of the US financial markets became so gross that even the very long term dynamics of the indices exhibited altered behavior.
I have no evidence that Fed or Treasury or any other Government agency behind this but from what I know, it is extremely unlikely that this buying is coming from domestic investment banks and institutions. If it did, it would be reflected in their earnings, so far , except GS, there is no such earnings flow seen among US investment banks. I don't even doubt that US investors / retail traders have nothing to do with this as they are severely decimated during the big plunge. We will see what I exactly mean when Retailers announce earnings soon.
Decoupling from currency, decoupling from overseas markets, decoupling from treasuries and all other malfunctioning dynamics of the financial markets tell me that what ever this entity is, it is mainly focused on equities and is not afraid of creating the next bubble which will completely destroy the system when it bursts.
In the summer of 2009, I gave three possible retracement levels for this bear market rally to extend : X1, X2 and X3 for S&P500 And I said that X3 is the highest point this rally can possibly extend although I said it was less likely to get to X3, here we are, chopping around this level.
X3 is currently passing through SPX=1127. The post-Christmas rally violated this pivot about 10 points which is acceptable for a 90 year long trend because unlike short term trends, these very long term lines have effective regions or ranges say SPX=1127 +/-x, where x being some small number like 5-10 points.
Therefore if the rally off the March lows was corrective and for all the "C-Wave" predictions I made for the long-term to work, we must have been printing the top ticks in the last few trading hours. The market already used all the possible upside room including the maximum tolerable extension into the X3. Remember that SPX had been pulled below X3 before the year end and the index closed both month and quarter below it. This thing must reverse here faster than it rallied.
If we breakout here, the next intermediate term target for the rally will be 1220. More importantly, the entire rally off the March lows can no longer be considered as a corrective bear market rally according to xTrends. Of course we may still get a big sell off but the long term perspective will be different and such sell off will be corrective. This is still not the case.
Following are some other sectors / indices that are still corrective on lifetime spans.
Due to the limited history of BKX, following are a few financial proxies with longer historical data
I have ungodly amount of work and a schedule busier than Obama. So I once again apologize for the absence in advance and I promise that when I am back, I am going to make it up to you.
Also I wish everyone a successful and happy new year, as well as the best of luck with your trading.
