And 2011 Walked Out of My Life Forever

2011 was far from dull. We saw the year that began with a revolutionary wave of demonstrations and protests occurring in the Arab world, a spike and then a large drop in both oil and gold prices, the Tohoku earthquake and tsunami in Japan, Osama bin Laden's death, sovereign debt contagion in the eurozone, the debt ceiling negotiation debacle, a Standard & Poor's downgrade of the AAA debt rating for the U.S., epic flooding in Thailand, Occupy Wall Street, and the start of the 2012 presidential campaign.

We were optimistic and we were fearful, but when the final bell rang on 2011, the S&P 500 closed flat on the year. I will be posting my thoughts on what to expect in 2012, but for now I will leave you with the following video from Reuters, a look back at 2011 in 60 seconds:

Where to Look for Support

Market is in sell mode now after seeing a rally in the after hours session. The brief but significant rally was in reaction to news that the ECB loaned banks a combined EUR 489 bln at its 3-year long-term refinancing operation (LTRO). That was well ahead of expectations, which were closer to EUR 300 bln. The positive reaction was quickly reversed and the negative sentiment has continued this morning.

There are two support areas to look for long entries today. The first one is 1222-1223 ES and the second is 1217-1218 ES.

Only considering quick trades or scalps if the ES doesn't trade that low.

Strong Buying Overnight Signals Strength

Markets see strong buying overnight as Dollar sells off and Euro see a bid. This signals that a bottom is now in for the year on the ES. It is doubtful we will see any slight lower low at this point.

Officially biased to the long side now heading into 2012, will look at dips as buying opportunities into the end of the year. If the ES sells off back down towards the 1200 area today it will be a buying opportunity.

Support levels to consider long entries today at 1208-1209 and 1202-1203 ES.

Price Levels Beginning to Look Attractive for Long Entries, But Slight Lower Lows Likely

We got the lower low that I was waiting for on the ES, though the SPY hasn't quite filled its gap from 11/29 (about 1190-1191 on the ES). The ES is now flirting with what I expect to be the lows for the remainder of 2011. That being said, there is no sign that the lows are in yet. I think a better long entry will come between 1185-1192 on the ES. From there I will be looking for about 30-40 points to the up-side. EDIT: SPY actually did fill the gap from 11/29. I meant that if you look at the chart in terms of the ES, the closing price on 11/29 is at 1190.

The bigger picture is still looking bleak. Mario Draghi and the ECB have been reluctant to fix the Euro Debt situation with more money printing. This is basically the same as saying that the acceptable alternative is deflation. Draghi has made it clear that he prefers finding a solution to fund the EFSF in order to pay off debt for countries like Italy, Spain and the other PIGs. The problem is, there has yet to be a viable proposal as to how to make this happen. The result has been obvious; the Euro has sold off, the dollar has seen a bid as a safe haven alternative and Equity markets around the world have declined.

We will eventually see some form of money printing in my opinion, but things might have to get worse first. Central Banks understand that printing money will be frowned upon and viewed as a catalyst to inflation. It will likely send the prices of gold, silver and commodities through the roof. So, when they do print money, it will be a clandestine effort.

In any case, I think the markets are due for a bounce into the end of the year. I like longs at 1185-1190 ES.

Market Declines As Expected, Preparing for Long Entries

The market has moved down as predicted in my previous couple of posts. Since breaking below 1200 overnight, the ES is up over 1% this morning including a 5 point rally following a better than expected jobless claims number. Although new jobless claims declined, I am not expecting a continued rally from here. Not quite yet anyway. I expect some consolidation now with resistance above at 1220-1221 and support below at 1203-1205. If we make a slightly higher high this morning, look for more resistance above that at 1225-1227.

I will be looking for one more lower low under 1200 ES. At that point I will be looking for positions to the long side.

Market Doesn't Waste Time Consolidating. Sellers Move Price Down.

So far things playing out perfectly in line with expectations. ES now approaching target area of 1212-1217. Although there is some interim support now at 1221-1225 that could see a brief bounce higher, expect that support to eventually break down. I will continue to hold shorts until the target area is reached. I will then consider long entries. ES could trade down as low as 1190, but I will look for long entries before that. There may be some good range play possibilities in the 1200-1220 price area as I will look for the market to consolidate there.

These are my expectations, we'll wait for the market to confirm it.

ES Saw a Bounce As Expected. Now Preparing For Short Entries

ES (December Contract) has found resistance now right in my 1255-1260 zone. This is 1250-1255 on the ES March Contract.

I will speak of price in terms of the March contract (ESH12) going forward.

I prefer short entries now and expect that the ES has topped, or will top, in the 1250-1255 range. I am looking for the ES to now resume its move down to the 1212-1217 price target. We don't yet have confirmation of a top, so trades will be intra-day or scalps until a clear topping signal triggers. At that point I will look to hold short until ES trades down to the target below 1220.

ES Has Begun its Move Down to 1217-1223

That being said, I believe there is potential support here around 1237 on the ES. I like Longs from here. I would like to see a rally back up to 1255-1260 before the end of the week on the ES. From that point I will like short entries and will anticipate a move down to the lower 1220s.

If the ES hasn't yet bottomed here at 1237 (today), I like support to hold at 1232-1233 and like longs again from there. If 1232 doesn't hold, then the selling will continue. If you are not already short by that point, then the best bet is to wait for the next best long opportunity around 1217-1223 ES.

NOTE: I am referring to price on the December Contract ESZ

Strength Remains

Last week the market rallied over 100 points. There was a good chance of a pull-back off the 1245-1250 resistance level on the ES, but sellers did not enter the market. I covered my short on Friday morning.

Reports that the European Central Bank is preparing to inject 1 trillion euros into its financial system for use in bond buying, and that officials in Italy have established a new austerity plan have produced confidence. Combined with the bullish market action, there is no reason to be thinking short at this point.

I do believe there will be an opportunity to get short for one more decent sell-off (30-50 points) before the year is out and that will only set up another nice buying opportunity. My immediate bias however, is neutral to bullish. ES could easily trade up to 1290 at this point. Short entries will only be scalps or day trades for now. ES could see a small move down this morning off the 1262-1264 resistance. Will consider long entries off the 1251-1253 level on the ES.

No telling signs at the moment, not looking to take any significant positions until better signals present themselves...