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Market Analysis - 1/5/2016

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My technical view this morning is presented in the charts below.


Chart 1. The S&P March futures contract (ES H6) reached the PRZ of the bullish Shark before staging a tepid bounce. More relief is likely in order ahead of
 the NFP report on Friday. TDST Resistance is at 2036.75 and should be the focus as long as Monday's low remains intact.


Chart 2. The S&P March futures contract (ES H6) - The 'Santa Rally' appears to have unfolded as a countertrend A-B-C (flat formation), evidenced by the new
 low registered on Monday. It's very possible the month-old forecast, which called for a bullish Crab to reach its PRZ near 1926, to still be in play. This can
 only be confirmed on a break under Monday's low. We stand ready to reconfigure our current trade structures at a moment's notice, should the need arise. 


 Chart 3. The S&P March futures contract (ES H6) - As of this writing, the price action remains weak, to say the least. Yet, we continue to forecast further
 short-term relief. This should get underway as soon as TD Sequential Buy Countdown bars #12 and 13 (blue labels) are registered on this hourly chart in the
 next couple of hours.


Chart 4.  Dow Jones Industrial Average (DJIA) - The 3PDh remains in its 'first-floor-roof' phase, and the latter is expected to end soon, setting the stage for 
the 'second-floor-wall' rally. Point 20 should occur in the vicinity of the blue line connecting the (year) 2000 and 2007 tops. Should this forecast play out, the
'second-floor-wall' rally should last into at least early April. The cupola should then complete in the subsequent weeks. 


Chart 5. The all-US-stocks Arms Index printed 1.03 on Monday, a reading identical to last Friday's. Any short-term relief rally that lifts this index well above 1
 could open the door for the final installment, per the forecast in charts #2 and #3.



Chart 6. Weekly options - Relatively high Open Interest in the $205 strike from both the bullish and bearish sides. Any relief rally threatening those 44,258
 $204-strike put contracts should prove unsustainable, likely marking the turnaround point. Notice the equally high concentration at the $198 strike, just
 below the SHARK PRZ that was reached on Monday.



Chart 7. Monthly options - The 254,994 $195-strike put contracts would immediately come to the fore upon a break under $200 (176,833 puts), and most 
certainly Monday's low. This would be consistent with the month-old forecast reiterated in chart #2 (i.e., $SPY equivalent of ~194.40).

Trade smart,

 Peter 


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