Crucial Market Pivots

Not only is the stock market at a crucial area, but the Euro, which is almost synonymous with the market.

So far on the first day of the week, the WOWS model portfolio starts out in the top 10!

While I'd love to see a bounce for many of our members, I have held all of my short positions because of what 3C has been telling us, despite the rumors of this and that, EU rescue summits and the current 'Santa Claus Rally", only adding to a few on market strength. As I explained during the move higher which ertainly wasn't fun holding leverged shorts during, I have been in this situation so many times I can't count, when everything seems to suggest I should cover, exept 3C and I can't remember the last time it failed me on an important decision like this, even when I don't understand what the dynamics are. I've often found if you wait for the explanation of why 3C looks the way it does, or you wait for confirmation of the bad news, YOU MISSED THE MOVE. This happened when oil crashed in 2008 and 3C called the end of the 5+ year bull market in oil down to the week. I went short, I had email after email telling me that oil is going higher, peak oil, and even the very same week that I went short and put out the short call, Cramer was on TV telling all his viewers to buy the next oil inventories report if it disappoints as a CONTRARIAN TRADE because according to Cramer, oil was going higher! This is surreal on a couple of levels, millions of Cramers viewers all doing the same thing is a contrarian trade? And no, I couldn't tell my readers why oil should head lower, why this was a top, all  could do was show them the 3C charts.

Here is what happened to oil the very same week I posted the oil bubble is about to pop and Cramer said it was going higher (I suspect to give his buddies at GS a herd full of sheep willing to buy a position they desperately needed demand to get out of).

 This was the week of the USO short, although 3C had been warning for over a month, the same week Cramer came out with his "Contrarian trade", which still gives me a chuckle (how millions of viewers all doing the same thing can be contrarian!).

 Here's what happened to oil after, an 80% decline, nearly parabolic!

 Here was USO at the time, you can see the daily negative divergence, but what was convincing was the intraday timeframes lining up.

AMR-American Airlines was another controversial all that stands out (based on how many reader emails I received ). I had said AMR was under accumulation and would pop soon, why? I had no idea beyond what 3C had been saying and as I recall, airlines weren't popular at the time as you can see by the preceding decline.

 The result, over the next few months a 200% advance.

 This was the daily positive divergence, although the intraday charts made the case more compelling, 3C even gave us the exit signal.

DXY-The Dollar Index was a tough call... There was no reason for the dollar to go up, it had been in decline for 9 months, 3C saw something that couldn't be explained.

 The result, a huge 20% rally for the Dollar Index (this may not seem like a lot compared to equities, but for the dollar a 20% move was huge).

Here was the 3C signal. A few months later, news broke that the US was going to pursue a strong dollar policy and a few other news items that explained the move came out. The point is, insiders on Wall Street know this stuff way before we do. If you have ever seen my year 2000 charts showing huge accumulation for homebuilders while tech was all the rage, you would understand that Wall Street is years ahead of the curve on occasion. Any way, the point being, 3C has brought me through some tough areas, even when I didn't understand what could possibly move the market, later it emerged, but later would have been too late, this is why I've held my shorts the last few months.

In any case, the point being, the FX and Equity market are at a critical pivot.

 Today toward the EOD, the Euro/USD broke the important $1.30 level, it tried to test it and failed, since this capture it had 1 more failed test then broke above $1.30 only to fail again.

 On a daily chart, the last level of support before $1.30 (which has a huge allotment of long contracts), bounced 1x and then failed, $1.30 failed soon after. Currently in blue we have something that looks like a bear flag, this could be used as a head fake to break to the upside, but that is assuming that the manipulators haven't lost control of the market, a situation in which the fundamentals overwhelm their ability to run short term manipulations as every time they try, sellers overwhelm the effort.

Here's a longer look at the  Euro, this is important support, if broken it will start or already has started a wave of liquidations of the $1.30 long contracts.

 Longer term we have lower lows and lower highs in the EUR/$USD which is better known as a downtrend, this is why a failure of $1.30 is so important as it will likely make a new leg lower and continue the downtrend.

Here's 3C for the Euro

 Compare this daily 3C chart to the one above, it is the same price pattern with 3C negative divergences at the tops and a positive divergence at one of the lows.

On an hourly basis, 3C has shown distribution in the Euro and is now leading negative making a new low.

Here's the critical SPY/S&P-500 hart, ready to break a trendline that happens to fall at the same area as the 100-day moving average and more importantly the psychologically important $1200/$120 level.

Later I'll try to put up the chart of 2008 in which this entire last few months has looks almost exactly the same, it was the model and the basis for many of our ideas about what the market would do and thus far has been incredibly accurate. History may not repeat, but it does rhythm , especially in the market where human emotions which never change are responsible for the bigger price action trend.