Executive Market Briefing | Issued Wed, Dec 5th, 2012 @ 4:55 PM ET  |  The Path Ahead for the NASDAQ 100 & S&P 500

Executive Market Briefing from The Research Desk of Efrem Hoffman | Issued Wednesday, Dec 5th, 2012 @ 4:55 PM ET | The Path Ahead for the NASDAQ 100 and S&P 500 e-Mini Futures Market 

Below is the latest Time Map of Current Risk Events and upcoming Trading Opportunities in the NASDAQ 100 e-Mini Futures, with Negative Implications for the S&P 500 e-Mini into the Spring of 2013.

(Click on the Image to Enlarge):

Dec 2012-Feb 2013 Time Map of Tail-Risk Events and Trading Opportunities for the NASDAQ 100 e-Mini Futures, with Negative Implications for the S&P 500 e-Mini and Broad Markets into the Spring of 2013.

Note: We have now entered one of the first in a series of Key Risk Intervals (within the Dec. and Jan. time zone), and as expected, the equity markets have weakened off the recent high (both in nominal terms and especially in recent days with respect to the advance in the Euro), and strong bearish divergences between the weaker NASDAQ 100 (largely due to technology infrastructure purchasing manager uncertainty from Fiscal Cliff issues, as well as recent AAPL related news events and deflationary risks coming off a high relative valuation ) and large caps multi-nationals (DOW and S&P 500 — which get a large part of their revenues in Euro currency — thus when the Euro is stronger, the currency conversion of profits back to US Dollars, for which US market equities are priced, add a tail wind to the US Dollar denominated market price on days when the Euro rises). This divergence is expected to result in a very large-scale broad market-wide sell off in December Risk Interval, and especially into the January, February, and potentially into the Spring of 2013.

The bottom line for today is the following:

The market risk profile has not changed, and I still see very high potential of a very significant asymmetric tail-risk event right into the Spring period — NASDAQ is the weakest link. The big note to take home is that the S&P is seriously deteriorating relative to the Euro — even when a small reversal of Euro takes place, sharp setbacks will likely strike large multi-national equities, which derive a large part of their profit from Euro-land operations. This will likely narrow the wide divergence between NASDAQ under-performance and the broader markets (a large part due to AAPL news and overall technology infrastructure purchasing manager uncertainty). The 1431.50 price level is current intermediate overhead resistance for the S&P 500 e-Mini Futures (Dec Basis value). Long term overhead resistance, as indicated on the latest TradingTimeAndPrice.com Time Map Video (referenced nearer to the base of this briefing) discussed remains unchanged, with very long range depression of equity prices, with virtually no material growth following the expected tail-risk event.

S&P/Euro Ratio is falling — so this indicates that the correlation of the broad US Equity Markets, and especially the NASDAQ is becoming less correlated relative to the Euro, particularly on up days in the Euro (due to other idiosyncratic risk factors more prevalent in the US markets), but on down days in the Euro the downside acceleration will be highly correlated. This type of asymmetry in the correlation on up and down days in the Euro is a serious sign of weakness in the domestic US equity markets.

The most dangerous period in December will likely kick off, especially when S&P 500 e-mini Futures price trades below 1382.50 for a complete trading day — the opportune interval for maximum downside acceleration to initiate would be somewhere in the time zone of Dec 12th, 13th or before or near Jan 1st. 1330 to 1300 is initial downside level, before potential interim market retracement.

If a major announcement is made that temporarily kicks the can down the road — then sign of strength would come in on the NASDAQ 100 in the event (not a forecast — only a scenario in the event S&P bearish support at 1382.50 (mentioned above) is not breached prior to this level getting hit) price levels exceed 2716 after Dec 10th or prior to Dec 16th. Even if this occurs, maximum upside potential would get trapped below the September highs (2798 to 2870) ; with a maximum long term spike risk (in event of positive macro events and geo-political developments) ranging from 2911.25 to 2949.75. Even in such a scenario, the Tail-Risk event into the Spring of 2013 is expected to yield a similar state of heightened crash risk for 2013.

Furthermore, the maximum expansion in volatility — likely to resolve itself in a market meltdown — would be strongest once NASDAQ 100 Futures (adjust contract month for Dec basis price level) trades below critical support at 2483.75 for at least one trading day. Thereafter, 2383.25 is the next interim price level, with possible retracement level thereafter near 2549.50 — before crashing back to at least August/October 2011 lows. Dec 20th into Feb 20th is the first in a series of extreme volatility risk intervals for 2013.

Given current and upcoming market conditions, the Time Map indicates that the 377 minute time frame for NASDAQ 100 and the 233 minute chart for the S&P 500 are the most appropriate observation time units to follow market action, identify trend strength, apply your favorite momentum and divergence indicators.

Although market manipulation appears to be rampant, it is this type of activity that sets up the best trades and investment opportunities. Time will certainly tell — the clock is ticking, and there is not much space left for the market to resolve itself. As Director of Macro-Market Strategy at TradingTimeAndPrice.com and NakedSwanTrading.com, I will be looking forward to actively focus my analysis and positioning into these opportunities, which are clearly stacked to the downside. This will set the stage for great buying opportunities in the strongest sector performers (on a relative basis) after the downside tail-risk pressures conclude.

By Combining this current market outlook (including Time Map of the NASDAQ 100 e-Mini Futures) with High Conviction & Proprietary Analytic Insights offered in the recent S&P 500 Futures (Dec.) Time Map video (posted last week — valid for several weeks),

you will be able to see the forward path of the S&P 500 market.

With the Time Map on your side, you will now know, with confidence, the optimal time frames to focus your observation of market action — including the time frames to apply for spotting the entry levels for the upcoming market opportunity, as well as the specific time frames to apply for both sticking with the trend (without getting chopped up in noise) and identifying the strategic exit level.

The time-line of the expected opportunity is also precisely identified with key support & resistance, and volatility escalation trigger levels (we also refer to them from time to time as Volatility Attack Points). When relevant updates are in order — i.e. as we are approaching key decision levels or triggering key volatility levels and entering extreme risk intervals — they will be posted in the key levels daily Blog section of TradingTimeAndPrice.com.

Moreover, vertical lines will also be overlaid on the Time Map to indicate important calendar dates of upcoming High Potential Risk and Opportunity Events –

– Pay particular attention to postings as we both approach these key date-lines and pass between them.

You should also review the Time Map section of TradingTimeAndPrice.com to observe the latest Momentum Jet Streams impacting the S&P 500.

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