Odd Scenario Ahead This Last Month of 2011

By Lawrence

First Time in 5 Years …

In the past 10 years, only 2001 and 2002 that ES is trading from below 200 day SMA to start the Thanksgiving rally. There is no real comparison this year how ES will react this time to the moving average that is hanging right above around mid 1260s.

Two Charts Telling the Same Tale

The more interesting thing that just happened this week, however, was how manipulated the markets really are.

Take a look at this chart starting from end of November 2010.

ES 2010 Year End

It took 2 weekends with 2 unfilled gaps to get S&P future to go from 1180 up to 1235. Then a week is needed to digest the gain before going higher.

Now take a look at this chart ending November 30th 2011 (Today).

ES 2011 Year End

What took year 2010 8 trading days to complete, now only takes 4 trading days. Same structure – start from a flush low, with 2 unfilled gaps, and 200% expansion from the prior week. Yet in year 2010, the 8 days gain was just 50 points while the one we got as of today is 80+ points.

So when people says that Christmas rally is arriving late this year, that is completely wrong. It arrived early (by a week comparing to last year) and already completed what a normal Christmas rally would have done in just 4 days.

It is obvious from the 2 charts above that the same market manipulation technique is used to force the stock market to go higher this year.

Outlook for Year End

There is a big difference between this year and last year – S&P was sitting above year 2009 close back in December 2010 while this year it is rallying towards year 2010 close from below.

Historically a rally that challenges the yearly close from below with such high speed usually results in very ugly selloff. This has not happened for many years. It was very common in the bearish years back in late 1970s to early 1980s.

For S&P to be able to rally further and taking out the year high, it has to gap above the 2010 close and consolidate above that. Otherwise, the rally is already over.

Funny how mainstream media are saying that Christmas rally has begun.

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Comments
  • geosing November 30, 2011 at 7:43 pm

    Great stuff. Makes me wonder about the “free and fair” capital market of ours.

  • Lawrence Chan November 30, 2011 at 7:56 pm

    It is the same as grade school teaching kids on fairness.

    LOL.

  • RoloRolo November 30, 2011 at 10:51 pm

    ty again for the insight LC

  • fmaz01 December 1, 2011 at 6:47 pm

    Thanks LC, great insight.. the more i learn about it the more i see is just an atm for the insiders and a big challenge for us to stay ahead… 🙂

  • Lawrence Chan December 2, 2011 at 8:28 am

    Adding this link here as a reference,
    http://finance.yahoo.com/news/ten-days-secret-planning-rescue-071412502.html

    The effort to pop the mkt was planned the week before.

  • Lawrence Chan December 14, 2011 at 5:59 pm

    As of today, ES printed near 1200.

    Those gurus who turned bullish 2 weeks ago calling for 1300+ by end of this week – they got it wrong again.

    LOL.

  • Lawrence Chan January 6, 2012 at 8:58 am

    For the record – by year end ES failed to take out the swing high made in early Dec.

    There was a year end rally as I posted in my Long Term Ideas thread just that statistics gave us a good bias to see what to expect and not blinded by b.s. from the media.

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