Pride Cometh Before The Fall?

Markets appear to be in a Rising Wedge formation during this period.

Rising Wedge Pattern

S&P daily chart

This is similar to the pattern that was observable (to the astute Technician.. ;0) back in April before the May "flash crash":

S&P 500 Rising Wedge during April, 2010

Also, I came across this link to a MUST READ Economic outlook that is predicting a recession in late 2010, early 2011. There are a lot of charts and discussion, but it should be understandable to even the layman out there.

The Future Recession In An Ongoing Depression (click on the embedded article for full screen viewing)

The primary crux of Pal's analysis is that the only economic growth we've had in the past year has been due to spending over a Trillion Dollars in government stimulus. Factor out that stimulus and it's evident that we're still in a recession/depression. It has NOT resulted in providing a buffer for GDP growth until the private market recovers.. The private market is still hunkering down, if not contracting, and they continue to lay off workers, therefore reducing consumer demand.

Now.. does that mean the market can't go higher? Again, I'm being VERY TACTICAL in my trading, and not yet betting on the "strategic turn" where I go all in and don't worry so much about trading, but more on riding the overall trend. It's coming, as all the fundamental data seems to indicate, but I don't want to be predicting the turn, but ready to be reactive when it finally manifests itself in a clear manner.

I see Christian from PSA is stepping out on a limb in predicting a sell-off prior to the Friday Unemployment report. The poor guy is STRATEGICALLY correct, but as for timing his swing-trade, he's obviously suffering a lot of pain.

Sell-off before Employment report?

I'm looking more at the SPX weekly chart with 100 Week MA for signs of ultimate direction to the market. It's going to lead every other US index.

Watch that MACD indicator.. If it continues upward in coming weeks, it's a powerful predictor of future price action.

Finally, I'm watching some of the currency turmoil we're seeing. The Yen is near a 15 year high against the USD and that is not a situation that can long continue without dramatic impacts on Japan's ability to export. Furthermore, the Euro has had a tremendous run since it's previous low of 1.18 against the USD. Part of what has apparently driven the US stock markets has been the decline of the USD.. Same can be said for oil and commodity prices, most of which are valued in USDs. The USD declines, the relative value of the stock and commodities markets appreciates. Watch for a reversal of this trend.

I often look at UUP, which is the USD bullish fund.. Plug it into the chart above and play around with it. Also, look at the VIX (VXX).. There is a new ETF that is the inverse to the VIX (XXV) that is going to be interesting to watch. The lower the VIX goes, the higher goes the equity markets.

That's all I have tonight.. Probably won't be trading tomorrow.. Got other obligations.

Scrutinizer