Near Term Outlook for the S&P 500 – Bonds Could be Caveat – Precious Metals Stable For Now –

S&P 500

Filibuster:

Definition of filibuster (noun)

1. Political delaying tactic: a tactic used to delay or prevent the passage of legislation, e.g. a long irrelevant speech
2. Legislative obstructor of the passage of legislation, through the use of prolonged speechmaking.
3. The use of obstructionist tactics
4. Military adventurer: a mercenary or irregular in a revolutionary army of a foreign country

Synonyms: staller, timewaster, filibusterer, wrecker, saboteur, delayer

It sure is beginning to feel as if a filibuster is holding the markets hostage lately.  The last 10 trading sessions stand at 8 higher and 2 lower.  It would seem that the longs have control of the “floor” and are not giving an inch in support of the “cause.”  If you take a look at the monthly chart out of the last 14 months – 12 were up and 2 were down. 

Elliott Wave Update (click chart to enlarge)

As in the DJIA the S&P 500 carries the same wave count.  A fifth wave of cycle degree (Supercycle to be more precise) began in March 2009.  Thus far Cycle waves 1 and 2 are complete.  Cycle wave 3 began in July 2010 and has thus far, subdivided 3 times.  The resolution of which will consist of a series of 4^th wave corrections (down) and 5^th wave advances.  The old adage “It ain’t over until the “fat lady” sings” seems appropriate against the current economic backdrop, but as many of my colleagues are saying they are hearing “her” warming up in the wings.

Near term the rally should begin to hit stiffer resistance at the 1682 to 1700 area with stronger resistance above at 1758.  As the series of finishing legs progresses a full on assault of the 1758 to 1800 level cannot and should not be ruled out.  There will be smaller corrections along the way, but I suspect they may be from hours to a couple of days in duration, with the rally picking up without hesitation. 

S&P 500 Monthly Chart (20 years) (courtesy of Prophet Charts)

From yesterday’s blog:

The longer-term charts are signaling new highs for the broader indexes before another correction kicks in.   The Russell 2000 pushed into that territory today and is seeing what is I loving call – the “TBTF long-term hooking” of the growing number of “yield seekers” aka retiring Baby Boomers.  To continue the rally, the TBTF analysts must

• Be convincing in their recommendation to buy on the improving economy,
• Prevent Interest Rates from continuing to spike higher,
• In fact they need to spike back down to “jump start” the next avalanche of buy orders. 
• Complacency levels must be restored as measured by implied volatility.  The result would be the VIX moving back (well) below 15. 
• Any notice of a change in the Status Quo must be squelched. 
• Keep an eye on the Employment Numbers –
  • If the rate declines moderately to strongly within the states of New Jersey, Michigan, Illinois, North Carolina, Georgia, Kentucky, Tennessee. Mississippi, or Nevada it could pull the national level closer to Bernanke’s trigger point.
  • If California, Florida, Pennsylvania, and New York continue to improve same scenario.
  • Full employment is (I’m sorry to say) not desirable since it usually ushers in higher inflation with it.  Therefore it is important for the TBTF and others to keep the risk “off” of higher interest rates – to keep alive the “carry trade.” 
  • Lastly, take a look at the chart below (from www.zerohedge.com) and check out who would have motive to keep the rally going via holding interest rates lower!

While some position trading will be highly profitable – I am continuing to find ample opportunities in day trading.  Depending on your objectives a combination of day and position trading could prove very rewarding as the current patterns unfold.

Diversified Trading System

I continue to recommend as the best trading platform available to a broader range of traders from novice to expert.  The Diversified Trading System offers a cost effective product that allows a trader to enter into the “chaos” and trade more effectively.  

Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility.  Automated stop-loss management and position sizing eliminates most of the problems most individual traders have.  Day trading and position trading both require (actually demand) good risk management.  Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades. 

A newer member of the money management tools available from Indicator Warehouse is the Profit Finder – System Back Tester.   When implemented it allows the user to:

• Immediately know the impact of parameter changes. 
• Automatically reads all of your DTS entries and exits
• Calculates the profit/loss of each trade
• Performs a wide number of essential intelligence boosting calculations instantly
• Provides solid details about the effectiveness of your trading strategy/ methodology/ indicators

The last two points above are valuable tools to use.  It will show you where some “tweaking” is needed to improve results through the back testing feature. 

My point on money rotation and sector rotation is similar to that on parabolic moves that they happen with frequency within many time frames.  As traders these types of moves can be a bonus for day trading or position trading so again don’t get caught up in the “what’s the catch.”    Realizing a rotation is occurring within a stock you trade or a sector is a great source of stocks to plug into the Diversified Trading System.  Allowing DTS to cleanly and beautifully capture the moves though any or all three DTS trading platforms.  Our goal remains to assist traders to make greater profits during all types of markets.  Sector and money rotation is another tool.

The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in the DJIA, YM (mini), S&P 500, ES (mini), RUT, TF (Russell 2000 mini), AAPL, AMZN, GOOG, NFLX, and LNKD, GS, and Tesla Motors (TSLA).    

Here is an updated list of the markets where I have found that DTS (all three birds) are producing numerous signals:

• DJIA future (e-mini available) – Highly recommended
• S&P-500 future (e-mini available) – highly recommended
• Russell 2000 future (e-mini available) – highly recommended
• NASDAQ 100 future (e-mini available) very highly recommended
• US$/Euro futures (e-mini available) – very highly recommended
• GS (Goldman Sachs) – good two way volume –
• AAPL (Apple Computer) – highly recommended
• GOOG (Google) – highly recommended
• LNKD (LinkedIn) – solid intraday range
• NFLX (Netflix) – solid intraday range
• TSLA (Tesla Motors) – highly recommended  
• 30-yr Treasury Bond future – highly recommended
• 10-yr Treasury Note future – solid two way trade
• TLT (Treasury Bond Long ETF) – very active
• TBT (Treasury Bond Short ETF) – very active (moves inversely to TLT)
• Gold (futures and ETF – GLD) very active – not suitable for all traders
• Silver (futures and ETF – SLV) – very active – not suitable for all traders