Bearish Factors:
1) DIA has not taken out its rally high from January 19th.
2) SMH left behind an un-filled down-gap Thursday morning.
3) The #2 leading sector XME is still a good distance from its January 11th rally-high.
3) The #1 leading sector XLF has not yet topped its dramatic island-reversal rally-high from October 14th.

The SPX broke out the top of my triangle. However, if the market stays range-bound here, struggling at the rally highs, I will be watching for another triangle to form. If you look back at George’s Triangle, you will see that it formed only after several days of struggle at the highs. The moral of the story is that if the market is going to roll over here, it will likely do so after a more prolonged struggle.

Shall I Create Some Jobs?
I just got a letter from the Census Bureau saying that my Census 2010 form will be arriving soon. If I fill it out and mail it in, I will save the taxpayers some money. But if I throw it away, I will “stimulate” the economy by forcing the Census Bureau to hire somebody to come looking for me. President Obama should give me a medal for that, no?

“The market never just sails out the top of these boxes; it’s usually a weeks-long ordeal.”

That was at the black arrow on this SPX chart (click to enlarge):

And we certainly had a “week’s long ordeal” with a little help from Greece, right? And now that the market has survived the trial-by-fire, it is free to break into the TARP Box. I’m thinking that it will pull back a bit here, but if it doesn’t, maybe we will get a swing high at the first level in the TARP Box, which is 1170.60.

That’s what happened when the market broke out of the Box of Bulls and into the Box of Beer in October. See the red arrow on the chart. If the market breaks out, and you want to short it, I wouldn’t even entertain the idea until 1170.

So, which way will it break? While the market has been defying my bearish charts, this is going to be the one to beat it down. This is a 5-minute chart of SPY over the past two days (click to enlarge):

This symmetrical triangle is a neutral pattern, but since it is occurring after an extended buying frenzy, I’m thinking that it will break to the downside. Let’s see if it develops like George’s Triangle did at the swing-high back in October:

The McClellan Oscillator is way up in the clouds. That doesn’t mean that the market will pull back; but it does tell us to be on our toes for a pullback.

The Fibonacci price extension projected up to 116, but SPY hit resistance at its January 20th gap. Now look at the big red volume bar from this afternoon’s mini panic. That was a lot of selling, and may be a sign that this pattern is played out. What do you think?

Not bad, huh? And now the IWM’s Fractal Dimension Index is back down in end-of-trend country (purple arrow). So “down” and “sideways” are more likely than “up” in the near future. We might have another scary plunge, or just a mild pullback like we had in August (blue arrows).

Warren Buffet sidekick, Charlie mUNGer, recently wrote a parable about the USA titled: Basically, it’s over…” I’m not disagreeing with his view, but look at this quote which refers to the USA:

“…rich in all nature’s bounty except coal, oil, and natural gas.”

OK, he was exaggerating a bit for his parable, but take a look at this weekly chart of natural gas over the past couple of years (click to enlarge):

The price of natural gas has continued to plunge right through The Winter of Al Gore’s Worst Nightmare. Does it look like there is an energy crisis on that chart? Not hardly. It turns out that natural gas is found in rocks, and the USA has lots and lots of rocks. In fact, we are sitting on so much natural gas that one badly placed spark could blow up the whole country.

That gas has been there all along; we just couldn’t find it. But now we have new technology, and we are finding it like crazy. If all that you have to dig with is a straw, the only place you will ever find oil is in Iraq. Everyplace else requires better drilling technology.

The moral of the story is that energy is a function of technology. If you say that the world will run out of oil on such-and-such a date, you are really proclaiming to know the future of technology. And seriously, who would be foolish enough to do that?

On March 4, 2005, the BLS reported that the economy had created 262,000 new non-farm payroll jobs. Seems like a miracle, right? But look what the market did (click chart to enlarge):

The SPX rallied on the news, closed up another 3 points the next day, and then went off the cliff. That swing high lasted for four months.

I don’t know if the market printed another swing high today, but if it did so, it certainly wouldn’t be out of character.

All the major ETF’s gapped-up Friday morning, but they all fell back to fill their gaps except for the XLF. The XLF single-handedly kept the market from rolling over. Everybody is expecting a weak jobs report this morning, and consequently the financials are cheering another month of expected easy money from the Fed.

If you are a bear, you can say: “That’s a dumb reason for a rally.” If you are a bull, you can say: “Rallying into a bad jobs report is an indication of animal spirits.” Traders appear eager to forgive a blizzard-weakened number, but will they really? Film at 8:30am. And don’t forget that swing highs, and lows, are often printed on NFP day. Maybe SPY will run up to George’s “Moo Gap” and set a bull trap.

Barry published my charts several times and always gave me full credit. He is a stand-up guy. Karl Denninger? Not so much. He published my chart without asking and did not link to my site. John Mauldin? He just plain stole my chart.

But now look at Joe LaVorgna of Deutsche Bank using my exact technique. It looks like he traced one of my charts with a crayon. Compare his crude chart to one of my highly detailed charts (click to enlarge):

(That chart goes through November 30th. My subscribers can see the real-time chart at www.DailyJobsUpdate.com.)

During the Summer of 2009, LaVorgna appeared several times on Larry Kudlow’s CNBC TV show and predicted upside surprises showing job-creation in the BLS’s “Employment Situation” report. He got it wrong every time, and gave up after a few months. It was an embarrassingly bad performance for such a heralded economist. And now he has embarrassed himself even worse. My charts have been all over the financial blog-o-sphere for two years. Everybody knows that this is my technique. It was very foolish of him to not give me credit.

You can read a criticism of LaVorgna’s analysis, and this technique in general, on this page. I agree with Wildebeest that LaVorgna is getting it wrong again, still being too optimistic.

However Wildebeest is missing the point of this technique. The US economy turns very slowly. From the MacArthur Causeway in Miami, you can watch huge cruise ships turning around in a giant watery cul-de-sac called a “turning basin”. It takes a long time; they turn very slowly. But once they have turned, they can sail out of the port. That is the exact type of turn that this technique is designed to depict.

Look back at my big chart above. For several months in 2002, there was “no progress” in withholding tax receipts. But the ship was turning, was it not?

At the moment, withholding taxes are still down year-over-year. That’s the raw data. But there might be real improvement after you adjust for the “Making Work Pay” tax credit. I have a detailed analysis on this page. I also provide charts of the raw data, and the adjusted data so that you can make your own judgements. Don’t forget that of the three people reporting on the withholding data, TrimTabs, LaVorgna, and myself, I am the only one who doesn’t run a hedge fund. So, not only do I proclaim to have the best analysis, but I also claim to be the only objective analyst.

(Note to perps: as you may have noticed in the links above, your infringing pages have been archived at WebCite and elsewhere. So, don’t bother editing your websites. Permanent copies exist. Take that weasels!)

(Note to fledgling bloggers: if you are trying to get your blog on the map, and have something that Barry might be interested in, by all means send it to him. If he publishes it, not only will you get full credit, but you will also get a link which will bring a torrent of traffic from his huge audience.)