Graham Summers’ Free Weekly Market Forecast (Resistance Edition)

The first
and most critical item to note is that stocks have hit up against their upper
trendline as denoted by their August, November and current tops. By most
counts, this is THE upside target for this rally.

This level
also happens to coincide with MAJOR resistance on the long-term weekly chart
for the S&P 500, the level last seen right before stocks fell off a cliff
in the 2008 Crash:

Of course,
we could see a breakout from here. After all, the Fed is pumping $112 billion into the market during 18 of the next 19
trading sessions (with that kind of funny money hitting risk assets just about
anything is possible).

However,
given that the market is as overstretched as it’s been since the Tech bubble
and that we’ve seen stocks remain above their 10-DMA for 30 straight days (the
only time this has happened in 82 years as noted by Sentiment Trader), the odds
favor a correction here to at least 1,250 (the bottom trendline) if not 1,225 (last
major top).

Much of this
hinges on the Euro, which suffered the mother of all short squeezes last week,
rallying a ridiculous 3% in just four trading sessions (an absurd move for a
currency) thanks to literal intervention from Asia and verbal intervention from
European Central Bank head Jean-Claude Trichet.

However, the
Euro has now come up against resistance: this current level has stopped the
currency dead in its tracks three times in the last month and a half. This
doesn’t mean that we can’t break this level. However, even if we do, we’d soon
be at MAJOR resistance at 137.5.

Remember,
regardless of short-covering bounces, the Euro HAS violated the trendline that
support it from July onwards. This technical damage of that move was severe and
makes the odds of additional downside significantly higher.

Speaking of
violated trendlines, Silver has not only broken below its trendline but has
since failed to reclaim it.  We
have support at 28 but could easily see a drop to 25 and change if we break
down from there.

This adds
further support to the forecast that stocks could drop sharply from here.
Remember, silver lead stocks to the upside during this latest rally. So
silver’s breakdown does not bode well for additional gains in stocks in the near-term.

Indeed, I
view the latest pullbacks in Silver and Gold as MAJOR buying opportunities for
both inflation hedges.

Good
Investing!

Graham
Summers

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Comments

[Bub Ba]

It's only in wave 3 of 3, got a long ways to go to the upside

[virgilcaine]

Wait for a large reversal candle to confirm.  We must let the Mkt come to us. A Large Long RED CANDLE..until then it's Robo's sandbox.  The internals are weak though.. could happen soon.

[klevera]

Calling the top is a risky business and i don't think that we will see a really steep sell off.

And u guys have been preaching the top since 2009.

I used to subscribe your free letters. If i had shorted every time u guys recommended,

I would have crashed my account. lol

[Orly]

If I'm not mistaken, technical analysts call this touch of the resistance line the "kiss of death."

[TradingJoe]

I beg to differ, its the "kiss my ass" (as in TheBenjieBernank's) line, given POMO all day and every day! We would all like a decent  correction to get some more "stuff' on the cheap but I am not so sure, manipulation can last longer then we have dough left!