Your Monday Dirty Dozen - Monday, December 9

He whom the ancients called an expert in battle gained victory where victory was easily gained. Thus the battle of the expert is never an exceptional victory, nor does it win him reputation for wisdom or credit for courage. His victories in battle are unerring. Unerring means that he acts where victory is certain, and conquers an enemy that has already lost. ~ Sun-Tzu, The Art of War

Good morning!

In this week’s Dirty Dozen [CHART PACK] we look at the near-term technical picture for the SPX and then we analyze the valuation hurdle coming for the US market, followed by a look at multiples around the world and then we make the bull case for Europe. Plus more…

  1. Last week was an interesting one for the SPX price action-wise. Let’s start with the daily chart below. Monday, the SPX broke below its 8-week tight bull channel (red highlight) after breaking above the upper trendline of its larger 6-month bull channel (green highlight) creating a bull trap false breakout, only to selloff down to the top of its even larger 22-month broadening top trendline (shown on weekly chart below) before reversing and ripping higher, back above the 6-month bull channel trendline right up against the bottom line of its micro bull channel, and ending positive on the week.

  1. Here’s the SPX chart on a weekly basis. See how we sold off last week down to the upper line of the larger 22-month consolidation zone. And then bulls aggressively took back control and ripped the market higher into the close for the week.

I admit I was expecting more follow-through from this move in order to reset the indications of short-term complacent sentiment and positioning that I’m seeing. And, though we may still get another leg down this week, the odds are now back in favor of a continuation of the bull trend. Action like this represents incredible strength in demand — this is not the type of tape you want to aggressively short. And when you combine this with the fact we’re moving into one of the most favorable periods of seasonality and nearly the entire fund manager space, who has grossly lagged the market year-to-date, will likely be chasing hard into the end of the year… well, the next few weeks should be fun.

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Disclaimer: All statements are solely opinions and are for educational purposes only.

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