My little experiment at trying to pick another top in the market did not work.  I dumped FAZ and will now stay on the sidelines and look for long opportunities in stocks and/or ETFs again, but very selectively of course.

I said in my previous post that we really needed to see the market do some real damage to close this week out to keep a nasty bear trend going into next week.  But it did not happen at least 20 minutes before the close today and now it is looking like the complete opposite will happen.  A continuation run in the markets that may even accelerate into new year time frame and beyond.

We are now piercing on the SP500 ABOVE the 50% fibonacci retracement level of this entire bear market instead of breaking down and failing below it.  In addition the WEEKLY MACD sell signal I had mentioned some time ago has turned into a failed signal and the market has once again evaded a possible bear trend signal.  This is the same type of thing that occurred in the 2003-2004 period were the weekly MACD kept repeatedly failing time and time again and the market just kept doing very small 2 to 4 % corrections but then just kept trending higher and higher, although it was flat for quite some time too.

We may enter a similar type scenario next year, where the market does have corrections but they are never more than 3 to 5% and the market moves still in a more modest uptrend and then sometimes long sideways trend.  That type of market environment would make it very difficult for bears to get large amounts of ripe fruit so to speak and it would probably be extremely frustrating over the longer term for them.

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The rest of this week is pretty much a non event as far as the market goes.  Volume has dried up to almost nothing in recent days which of course is no surprise given the holiday week we have this week and the half day of trading on Thursday.

I still think this market is within a 1 week window of a significant top at these levels.  If the market is up very significantly the next two trading days and/or the last 4 trading days of the year next week, then I am probably wrong about this being a top.

However, if we are down tomorrow and either flat or down on Thursday, then we may be set up for a nasty plunge sometime next week or end of next week.  That is how all my charts are set up.

The Bollinger bands on the major indices are extremely tight right now which makes sense given the tight trading range we have been in for about a month.  Volatility is at record lows as well.  At some point the Bollinger bands are going to start expanding and create a new volatility trend.  It could be either up or down, but my take is that it will be down and possibly fast and furious down.

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The FAZ Triple Inverse Financial Bear ETF looks extremely attractive to me right now based on everything I am seeing in the market.  The UNG performed as expected and is now getting to be a tired trade already and I suspect it will pull back some before building higher down the road.

But now the FAZ has flashed all sorts of buy setups and looks very good to me going into next week and end of year and early January.  I think we could see FAZ blast higher into the high 20’s range during the next 1 month time frame.

As I indicated in a previous post, the WEEKLY MACD has now turned down on the SPY and the SP500 index.  That means that the market will have weekly bearish headwinds going into next week.

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There are only about 8 real trading days left until the end of the year if you exclude the days around Christmas.  So that means about 8 trading days to create the final YEARLY price bar close and then start the next one for 2010.

The market has powered up so fast and so persistently in 2009 that one would think people would take at least a few points of profit and capital gains.  For us to close the 2009 yearly price bar only a couple points from the yearly high seems improbable.  Just like on a daily price bar right before 4PM you see day traders exiting, I think we could see similar type price behavior going into end of this year.

In addition I should also tell you that I have noticed some OMINOUSLY bearish looking candlestick formations in recent days on the SPY ETF and DIA ETF and also the SP500.

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I continue to be long the UNG natural gas ETF since I first mentioned going long at 9.38 on December 8th.  Despite all the negatives you will hear on stock message boards and elsewhere about how no one needs Natural Gas anymore, the chart is quite compelling to me.  There is so much negativity on this ETF right now that just based on that alone it is at least worth a look.

Did you know that if the Dow Jones Industrial Average was up the same percentage amount as the UNG ETF was on December 10th, 2009, the Dow would have been up about…

787 Big Dow Points in One Day!

So my point is that the market is always throwing you different pitches, each with a different risk reward.  Where the risk appears to be the highest it is often the least, and where the risk appears to be the lowest it is often the highest. 

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Despite my previous post talking about UNG needing until end of year to get a reversal going, I am seeing enough right now on the daily chart to try going long UNG again at 9.38 with a stop at 8.96 which is just below the super high volume gap up day.  It seems like a compelling setup and relatively low risk/reward type setup.

I have noticed a couple of 2B buy setups on the chart and combined with the daily macd histrogram and the super large volume buy day the other day I am willing to bet that UNG has a more important bottom here. 

It could still be choppy for a while but this just seems like a good trade here.  Almost everything else is overbought out there right now.

The chart is showing a small broadening wedge pattern near the double bottom retest and we may trade up to the top of that range combined with hitting the 50 day moving average before getting some kind of downward consolidation.

The cold weather spell out there seems to be helping support the UNG ETF as well .

This is a very interesting candlestick chart of the SP500.  It is the YEARLY price candlestick long term chart.  There are few interesting things we can see from this chart.  The most obvious is the very clear long term trading range almost 10 years long.  Despite all the bears endless preaching the fact is that so far at least the market has not been able to break DOWN out of this trading range and therefore keeps the cause building consolidation case intact.  The longer the market trades within this large trading range without breaking down under 900, the better argument can be made that eventually it will break topside.

The other thing to note is the current 2009 yearly candlestick.  This massive yearly candlestick has a large bottoming tail which indicates the strong demand that came in and held prices within the trading range.

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The UNG Natural Gas ETF long term monthly candlestick chart looks good for a possible real longer term reversal starting in January 2010.

The current monthly candlestick on the UNG ETF is shaping up to be a bottoming tail and I think it is a good idea to keep an eye on that monthly candle as December 2009 comes to an end.

I don’t think the UNG ETF will be able to break above the down trend line resistance significantly until January 2010, but whether it does it in December 2009 or January 2010 is irrelevant at this point.  If it achieves that then it is signaling a possible major trend reversal and possible extended new uptrend.  I am viewing 10.20 and higher as a key level to sustain

The monthly MACD continues to slow in bearish momentum and I suspect it will be ready for a bullish cross going into January 2010.

So the UNG ETF could very well be an outstanding core type trade within this key time frame.  The daily chart has down that the UNG is forming a more complex double bottom formation.  I suspect that the UNG will continue to play lots of head games down in this range until it gets enough of a launch pad to get the new uptrend going. 

This is definitely a slow cumbersome process but I believe a 2010 trend change of some sort is at hand.

Timberline Resources is holding up quite well above its 50 day moving average (red line) and the recent 3 day decline has been on dramatically lighter volume.  The gold price has made a nice upside reversal reaction as well as the GDX mining stock index and I suspect that both will retrace upwards a bit this week and then move into longer consolidations perhaps 2 to 4 weeks long.

TLR could be forming a small handle of a cup and handle type formation here.  A large surge in volume is really going to be the only clue of a breakout type move out of this pattern.  But there is also the risk it may just flat line for the rest of December as it has done in the past.

Still worth keeping an eye on TLR in my opinion as it is a nice upward trending gold stock in a basically sideways consolidation with low volume decline days and big volume accumulation days.

The overall chart structure and historical trading pattern and current trading action in the .046 cent gold mining penny stock CVRG Converge Global continues to look good for this beginning week of December the 7th.

My weekly indicators are telling me that this week that begins December the 7th is a possible breakout week for CVRG.  CVRG has the opportunity this week to make a breakout north above the critical .05 cent level.  A breakout here would come from a 3 month head and shoulders bottoming formation that is astoundingly symmetrical.

That head and shoulders bottoming formation could also be the last basing formation CVRG does as it may now be ready to start the mark up stage.  The blue arrows I have drawn in the chart show how CVRG has had progressively less and less selling pressure which is evident from the slope of the declines being less and less until they got to the point where CVRG basically traded almost completely horizontal during the October time frame.

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