Jul 21

Weekend Outlook for 23th July 2012 – The bull is near done and a major sell off will occur

As I’ve posted in the last weekend analysis , that the bulls might have chances for push higher before the big drop coming ,, I still think there is a POSSIBILITY we might see higher levels early next week , probably into Apple earnings on Tuesday.

In late May/June I said that the markets were due for a contra trend rally – and since then we have been rallying,, but it has been a “weak/choppy” rally which does NOT bode well for markets imo.

So far markets have been following the SPX prediction layed out with the major top to be in early this year in world indexes and at latest in March 2012 and so far this is STILL THE TOP……….

I believe that this is just a contra trend rally before we are heading down again below June 2012 lows now.

All the long term charts still looks extreme ugly and I have not much doubt that sooner or later , this markets is going to break apart as the long term charts suggests…. it can be a violent ride to the downside in the markets.

So conclusion is:::

1. VIX charts indicating that the bottom in VIX is in or close before a MAJOR move higher in VIX into 30-50 in a sharp move up ,, this is my thinking.

2. The SPX charts suggest that the markets nearly topped out from June lows (the rally from June) before the next big sell off will occur.

3. Short term charts suggest a confluence of resistance at 1390 and very likely I could see another rally up to 1390 before topping out, but IF WE BREAK below 1360 on Monday ,, then most likely the top is IN and the sell off has started.

So all in all – I think a possible short term rally up to 1390 could start early next week and after this ,, a major drop in markets should start targeting 1200 at least in a sharp move lower. VIX will confirm this with a break above the bullish falling wedge.

Long term charts still very very nasty….

Also take in mind the inverted hs pattern we saw 1 month ago ,, this targetted 1405 or so – and if markets goes to extremes,, this could be the “extreme” in any case.

Watch SPX 1360 to downside and 1390-1405 to upside.

I took 50% profits in UVXY on Friday from 6.57$ at 7s and holding still 50% just in case ,, also got few TNA over weekend as hedge if we rally up to 1390.

Enjoy the weekend everyone !

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