No Santa Rally For Equities This Year

A bearish confirmation took place last week when the Dow fell through its 200-day moving average line (green) on Wednesday and failed to close above it in the 2 days following:

The Dow priced in USD further confirms bearishness in the index. According to this chart, the Dow was stopped out by the 200-day moving average back in early November and has stayed below it since. Further, the 21-day line (blue) crossed under the 34-day line (red) earlier than in the chart above, and has a more pronounced downslope:

The next chart shows the Dow overlaid with the euro. From the end of September to the end of October, the two are almost perfectly superimposed. The euro has since fallen away, and this is probably a leading indicator with respect to equities:

Another leading indicator is probably the note yield on 10-year Treasuries. The note yield line fell away from the Dow earlier than the euro and fell on Friday as the Dow stayed flat:

The Dow's monthly chart shows a trendline drawn from the May 2011 high. If this downsloping trendline holds, which has been the case so far, the Dow should be capped at the current month-to-date high of 12257:

The weekly chart shows a different downsloping trendline drawn from the Oct 27th high (upper line). This is parallel to the trendline connecting the March and August lows, forming a potential trendchannel going forward. The trendline forming the top of this trendchannel crossed 12000 last week, and will be about 100 points lower in the coming week:

The daily chart shows that this same downsloping trendine will more or less overlap with the 200-day moving average line on Monday, 12/19/11:

The 200-day moving average combined with the trendline shown in the daily and weekly charts should prove to be formidable. The Dow should fall starting Monday, which should develop into a spectacular collapse.

The reason that the coming collapse should be strong is because of the head and shoulders pattern shown in the weekly chart. The tops are in February (left shoulder), May (head), and July (right shoulder):

The rising neckline (red) stopped out the October rally, which was a bear market rally. The full effect of this head and shoulders pattern should now play out going forward, and the Dow should fall toward the lower line of the trendchannel.

Disclosure: I am long TZA.