THE BOTTOM LINE
The bear reasserted its dominance this past week by violating key levels at S&P-500 3898 and 3859 following a “BIG CHILL” warning. Santa beware the return of the bear!
RETURN OF THE BEAR
This past week the stock market responded to the recent “BIG CHILL” warning by taking out two key support levels at S&P-500 3898 and 3859 while going on to threaten a third at S&P-500 3800. The market has become oversold in the process according to several supply and demand indicators, so a pause in the decline early next week to relieve the oversold conditions should not come as a surprise to investors. However, neither should a breach of S&P-500 3800 in the days immediately ahead come as a surprise given the preliminary evidence that the bear has returned implied by the violation of the key levels of S&P-500 3898 and 3859.
TATY — A REPRESENTATIVE OF A FAMILY OF STRATEGIC SUPPLY AND DEMAND INDICATORS
TATY is shown above in yellow with the S&P-500 overlaid in red and blue candle chart format. TATY finished the week at 135, an improvement from last week’s 130, which implies there maybe a rally attempt early next week to relieve some oversold conditions. However, the recent “BIG CHILL” warning remains in effect, so the bias is for declining prices until there is measurable evidence of some sort of bottoming activity. For the time being TATY has done its job by completing a “BIG CHILL” warning, which has been confirmed by an S&P-500 decline from 4100.96 on December 13th to 3828 on Friday, or approximately 6.6%.
SAMMY — A REPRESENTATIVE OF A FAMILY OF TACTICAL SUPPLY AND DEMAND INDICATORS
SAMMY is shown above in yellow with the S&P-500 eMini futures contract shown in green and red candle chart format. SAMMY became overbought above its red dashed horizontal long time resistance line and then confirmed the recent TATY “BIG CHILL” warning by declining back below that resistance line. SAMMY ended the week still below the resistance line, which implies the bear has likely returned.
STERLING — A REPRESENTATIVE OF A NEW FAMILY OF SHORT TO INTERMEDIATE TERM TRADING INDICATORS
STERLING is shown above in the upper panel with the S&P-500 eMini in the lower. Please notice that STERLING has painted out an “island” candle below the red lower Bollinger Band, which is an oversold condition often preceding a bounce in the price. This implies that the first minimal leg down in the resuming bear trend may have ended on Friday, which implies some sort of rally attempt early next week. If S&P-4101, just above the December rally high at 4100.96 is not exceeded on any rally attempt, then the odds are favorable that the bear market resumed at the S&P-500 4100.96 level on December 13th.
Screenshot-1107 (above) is the S&P-500 eMini futures contract with a dotted horizontal orange resistance line drawn in off a previous rebound high. Please notice how the countertrend rally was repelled at this resistance level containing the rally well below another higher resistance level shown as a horizontal dashed red line. The implication here is that despite powerful and violent rallies, yet another lower rally high has been painted out and confirmed by a subsequent decline.
Screenshot-1108 (above) is the S&P-500 cash index, which is a textbook example of support once broken becomes resistance and vice versa, as the price wandered all over the support, and then resistance horizontal dashed red line. The support from this line was broken again as the bear market likely resumed this past week after the rally failed shy of the higher horizontal dashed magenta resistance line at approximately S&P-500 4120.
Screenshot-1109 (above) has been shown many times and is updated here through Friday’s close for your additional information and perspective. Given that the bear has likely reasserted its dominance, the crudely drawn in white dashed lines still represent a likely path the bear may take. However, there are other paths available, so the one drawn in is not intended to be definitive.
Please note that as drawn the white dashed decline line holds above S&P-500 2190, the March 23, 2020 low, which means this bear market would only be a correction of the last leg up in the Great Bull Market. However, a breach of S&P-500 2190 would imply a much larger “degree” bear market was in effect, which would likely have dire consequences in terms of global chaos socially, economically, financially, politically, and geopolitically. Until S&P-500 2190 is violated on a closing basis we will continue to treat this bear market as a correction of the last leg up in the Great Bull Market from S&P-500 2190. Should 2190 be violated, then we will publish an updated report covering all the pertinent implications and support levels.
