Breakout or Breakdown?

U.S. markets have rallied massively in the last month and have returned to previous highs.  Resistance is at hand, and we should soon discover whether the late summer breakdown is re-confirmed by failure here, or another leg higher is in store.

Here is the S&P chart, with strong resistance around 2100. I am view this most recent rally as another small rising wedge.

2015-11-05-ES-ST_CHARTS

Here is the longer term view of that same S&P pattern.

2015-11-04-ES-LT_CHARTS

The Nasdaq QQQ also broke down from a multi-year rising wedge. It is now testing the underside of previous support.

2015-11-06-QQQ_CHARTS

One stock that may be a useful companion to that trade idea is MMM. Like the S&P, MMM broke down from a rising wedge, and has returned to the underside of old support.

2015-11-04-MMM_CHARTS

I remain of the view that we are witnessing a topping process.  As such, I see the current action as perhaps a final re-visitation of this price area. Naturally, it is a belief I hold loosely as recent years have made all such bearish wagers dangerous business on which profits needed to be taken pretty quickly. We’ll see if this plays out any differently.

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  1. Draft
    January 4, 2016 at 10:52 am

    Do you think this is finally the real breakdown, or just another short dip?

    • January 4, 2016 at 11:07 am

      I continue to view this entire process (all of 2015) as a major top. It seems to me we should be at the back-end of the process (it took much longer than I ever imagined), so it wouldn’t surprise me if the market has a dreadful January. That said, I am also aware that all of the world’s Central Banks are playing the same paper-wealth ponzi game that involves propping markets, so while extremely confident that the long term picture is very bearish, I am not particularly confident about my short-term bearishness. I am positioned very bearishly, and have been for awhile now, not ultra-aggressive in terms of how I’m playing it because I’m not sure of timing.

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