Squawk Morning Briefing: Speculators, Manipulators, and Capitulators

This is one of the most difficult times of year to assess and trade market moves. The reason is that many of the moves aren’t natural; securities are often bought for reasons other than someone wanting to own them and sold for reasons other than someone no longer wanting to own them.

If the past is any guide at all then one thing we can have confidence in is that trading volumes drop next week as many will be on holiday and liquidity will be lacking. As traders contemplate many of the unnatural year-end effects such as window dressing, speculative bets on fiscal cliff negotiations and late tax-related selling, those with real money at stake need to hurry and place those bets now when the market can absorb volume.

Of course that is all happening at the same time as monthly option expiration and quarterly futures expiration. Sometimes one can see some pretty wild action in futures markets the Thursday night before such an event. Most index derivatives settle based on the Friday opening print and those with real money at stake sometimes find it worthwhile to try and impact the tape at the open.

With all of those forces at work this week, it becomes hard to figure out the right path. But if traders big or small get it wrong and want to reverse course next week then they may have to find their way out through a smaller doorway next week.

There are still multiple paths that markets could follow, but the updated analysis in today’s videos contains our latest view on what levels and actions would be sufficient to convince us that we know the likely trend from here.

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Elliott Squawk delivers thorough market preparation every morning in time to take action during the trading day. By combining up-to-the-minute futures activity with traditional end-of-day analysis from cash indices, you receive analysis based on the latest conditions as the trading day sets to open. Each issue of Elliott Squawk goes beyond traditional Elliott Wave analysis because we recognize that trading Elliott Waves is much more than just looking at the most likely current count. Squawk will prepare traders to assess the market action as it unfolds by answering questions that any Elliott Wave trader should consider:

• What price levels and wave motions would confirm an expected move?
• What price levels would make an alternate scenario more likely?
• What technical indicators should be watched throughout the day to interpret wave action?
• What intermarket movements merit special attention to understand likely price trends?

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Each day Elliott Squawk will update the outlook for the following markets:

• The Dow Jones Industrial Average
• YM e-Mini Dow Futures
• The S&P 500
• The EUR/USD cross
• The U.S. Dollar Index
• U.S. Treasury bond futures

From time-to-time when circumstances warrant, Squawk will present analyses of other markets that help interpret wave action in a covered market. For example:

• If S&P 500 and Dow counts are ambiguous and NASDAQ behavior helps identify the likely next move then NASDAQ analysis will be presented.
• If the EUR/USD count is ambiguous and the USD/CHF cross helps us to understand what might happen then we’ll present the intermarket analysis the Squawk subscribers.

At the end of the day Squawk subscribers will receive a brief market recap that summarizes how the day’s events compared with expectations and what issues are likely to be analyzed in the following morning’s Elliot Squawk.

About the Analysts

Kevin McEwen and David Starr are best known to First Wave chat room participants as Kevy99 and Managematics and by their reputation for their Elliott Wave counts that have predicted market turning points. Kevin has been counting Elliott Waves for 28 years, successfully forecasting market moves in virtually every financial environment. David brings together talents in financial market analysis and software development to his wave counting. He has authored many of the studies used by First Wave Traders as well as a number of proprietary studies to aid in counting waves.

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