seasonal cycle

The bullish seasonal cycle begins in march. So, we are inclined to call it a low. We have another major cycle low around March 15th. So net-net we are looking for an intermediate term low in the first week of march.

For the above outlook to hold, we need to decline pronto. Any rally exceeding Feb 24 means we are actually heading higher. As of this writing, there are no signals to go short. Plus if a significant bear market has to unfold in the later half of 2010, we need to see distribution and that typically takes 6-8 weeks of choppy trapping action. As of now, we want to see how the seasonal rally out of the march low will unfold. If it is strong, we expect a top near 1270, otherwise we could just make a failed double top (~1170) or some such.

We will wait to see how the market handles itself into march 1 before any trades.

For now, we don't see any tradeable charts. If gold declines into the march 1 timeframe, we would buy it based on the HL chart in the previous post.

bigger picture

The weakness comes in on very light volume which should frustrate so many technical analysts out there. We said in our last post, yesterday was anything but bullish, internals were bad. That is not how a consolidation should look. We are looking for a sustained down move in this market into the march 1 timeframe.

Two conditions were met on Jan 15. In our weekly scan of over 500 charts, we found about 15 bull setups. Furthermore, none of these 15 broke out. This told us to look for weakness. Some of them like YUM, LRN have held up into selling forming their long winded consolidation patterns, but one has to ask given the strength in the last two sessions (cycle turndates on 29th), why these haven't broken out. We think we will get another quick blast to the downside this month. A few battered ones will start to turn around by Feb 15, while others will continue to lag till Mar 1. Our first target for the SPY is 1050 and the 200d moving average after that. We don't know if the march rally will lead to new highs. But we know it will last for months.

We present one such stock we are looking at, not that it is representative of the market, but this miner has very nice cycle properties.

bearish

Lets give the market another day to prove itself over 1104 area. But technically there was nothing bullish about today. Maybe we will get continued weakness into feb 15 time frame. Looking for spx 1050 over the next 2-3 weeks.