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Where Will Markets -- NDX and SPX -- End on December 31, 2012?


Here, a technical take on ascertaining the most probable hypothesis.


This type of analysis can be somewhat vague when attempting to pinpoint the target rather than determine a range. This is primarily due to the massive volatility of the recent (~1-year) channels. Yet at the same time the high end targets equate to our previous editorials when evaluating the next likely long-term resistance points. (It is always advantageous to apply a multitude of techniques to confirm or deny one's principal analysis; the more the better.)

Due to the slight ambiguity of the research presented, technicians should follow this with internal channel scrutiny not only to confirm its longevity, but to become more specific. This can be done with the understanding that channels typically have one or multiple internal parallel trends which equate to the outside barrier. When scrutinizing the smaller inner trends, clarity of overall strength arises. Again starting with the NDX, we have not only outlined the intermediate-term channel (blue) with the smaller internal trends parallel to the overall trend with light blue dashes, but we also outlined the smaller countertrend areas in red and smaller bull cycles with black dashes.

Click to enlarge

Without overcomplicating the analysis, the interior inspection provides the ability to establish strength and probability of continuation. As for this chart, potential weakness is beginning to arise with the break of the latest internal bull trend (black dash). Conversely, it is still holding the internal parallel trend (blue dash). If this were to break in succession, the technical likelihood would be a return to the bottom of the intermediate-term (~2,650).

The SPX channel analysis is similar in nature when evaluating direction and internal (parallel) health. Conversely, it has yet to break the inner, steeper sloped bull trend (black). A break of either of these lines (~1,400 – 1,425), akin to the NDX analysis, would return the index to the bottom side of the intermediate trend (~1,350).

Click to enlarge

I hope this helps and finds you well.

Editor's Note: Read more at Tesseract Asset Management.

Twitter: @TAM_News
No positions in stocks mentioned.

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