A long term view

The market has deceived me into not buying yesterday. I also expected a drop before the FOMC announcement but it looks like it won't happen.

The way the daily chart has rallied to new highs without any pull back after the fast drop last week reminds me of the summer-autumn of 2009.

Here is a chart of the December 2009 ES contract.

Back then, the market would rise straight up to new highs only to correct again deeply below the previous high. If this is the case now, we are in for a roller-coaster ride.


While waiting for the next pull-back here is a long term perspective.

On the monthly chart below I have drawn past resistance levels but also the ones that lie ahead, as this is where an intermediate term top (a top which precedes a 7-10% correction) may take place.

S&P500 monthly chart

The green arrows show a possible road map. This bull leg will encounter strong resistance at 1450 from where a 7% correction would bring the market back to 1350.

A move to 1450 would make the rally that started in November 25% long - nothing out of the ordinary.

A stop along the way will probably be just above the 1400 level, where there is also some resistance.