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Tuesday, December 20, 2011

Santa Lives!

For the last several months, every time the market breaks what looks like a critical support level, it rallies like crazy, and we got that again. After yesterday's breakdown (and likely sharply increased short interest), Santa Claus came to Wall Street and squeezed the hell out of them once again. Today's move came on pretty decent volume, and broke all exponential moving averages, are about to get a whipsaw in MACD, and ATR ius in a steady decline. Despite all that, the "big picture" view so far suggests nothing more than a bounce fueled by short covering. It does, however, sharply nincrease the possibility of a move up into the end of the year, something the big money managers desperately need to keep their jobs. 
It is remarkable how well crude oil has held up in the face of terribly bearish conditions, never breaking the 92 mark and bouncing back very sharply today. Of course, the situation with Iran is going to affect this, and if that ever gets resolved (fat chance), that will help stabilize prices. However, with stagnant supply, this is unlikely to break 90 for very long. Only a collapse in demand, or a sharply rising dollar, will bring this back to what seemed to be an impossibly high level 4 years ago, 70.

I expected a long base in gold, and it looks like we are getting it. This latest drop has "margin call" written all over it.
Treasury yields keep threatening to move up, but the trend is down, and after each little up scare subsides, the down move continues. Someday we will have our "Greek moment" when yields shoot the moon, but not anytime soon.

Short term, the trend in the dollar is down. In the intermediate term, it is up, and until that changes the bearish stance of the market stands. MACD is now in a position where it could flip over, so that change may come sooner than expected.

We have been in a bear market since May 1st, and in that time we have had several mrip your face off rallies. All of them fizzled as soon as they hit resistance, and I have no reason to believe this one is any different. The expected Santa Claus rally may have arrived. but there is no gaurantee how long it lasts.

I will have the new highs update shortly.

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