By Gary Savage, Smart Money Tracker

With the S&P losing support so early in a new daily cycle on Friday I�m afraid we�re probably set up for a choppy market in January.

I had my doubts as to whether the market could break through 2100 on the first try, and Friday�s move has probably confirmed that it is not going to happen. With the market starting down into a half cycle low, along with an upcoming earnings season, ECB decision on QE (Jan. 22), and Greek vote (Jan. 25), I expect the stage is probably set for the market to chop sideways underneath 2100 for most of January before a brief breakout late in the month.

As a matter of fact I suspect the entire first quarter is likely to be difficult as I expect the rally out of the early Feb. daily cycle low (diagrammed in the chart above) will probably form as a left translated cycle and then drop down into a sharp intermediate correction. Why? Because I expect Yellen will set a date for the first rate increase during the Feb. Humphrey Hawkins address. The market will rebel by falling hard into a deep intermediate degree correction. (Don�t get me wrong, I�m not calling a final top. I still think there is little chance the market tops before the NASDAQ reaches 5100.)

If the move is deep enough it might even trigger QE4 and that could give us a final parabolic move to top off this QE driven bull market. 

So if stocks are going to be stuck in a volatile trendless consolidation for a while then where can one make money you ask?

Day traders may do OK in the weeks and months ahead, but I think the most likely place for at least a tradable trend may come in the commodity markets. They are way overdue for a counter trend bounce, especially oil. Just don�t get too greedy as it�s still too early for the CRB to form a final 3 year cycle low, so this will probably be short lived. But we could see commodities rally for a month or two before resuming their bear market trend into a final bottom maybe later this summer or next fall. 

This would square up with the dollar moving down into an intermediate correction as it is also way overdue to take a breather.

The key is oil. Oil has to break free from OPEC forces trying to push it down. In order to do that it�s going to need some help from the dollar. So watch the dollar for a sharp break to the downside in the days ahead. A large volume spike on UUP on a down day would also be a clue that the intermediate tides may be ready to turn� at least for a month or two. 

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 -- Published: Thursday, 1 January 2015 | E-Mail  | Print  | Source: GoldSeek.com

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