Here’s a 6-month shot of the S&P500 futures:

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Source: Interactive Brokers

Looks like another good short set-up here, using a couple of points over today’s high as a stop and 1055 as a target (with much greater bearish potential of course). Like many bears, I’ve been expecting the 2009 rally to peter out since summertime, and I’ve been continually surprised by the stock-buying public’s recklessness, delusion and plain stupidity as evidenced by a PE ratio well over 100 in the face of 10%+ unemployment, shrinking credit, and accelerating foreclosures and bank failures.

That said, the market since summer has given us a series of fairly clear short-term sell signals and has obeyed them with a series of 4-6% declines. Unlike previous rallies that powered through resistance into solid new highs, the rally since the latest interim bottom (November 1-2) has stalled out well within the price range of the previous top (mid-October). Not only that, but the distribution (choppy) pattern within this three-week plateau has exhibited a much wider range than previous ones. Might this instability indicate a pending phase shift, such as when a top gets wobbly before toppling over?

Oil

I want to show some basic charting here with crude, which is supposedly falling because of the supply report today, an explanation that I consider hogwash. Rather, the chart offers some examples of a very simple sell signal: the broken trendline. Yesterday’s signal was classic: it broke a very clear uptrend at a couple of different degrees, attempted a re-test, then fell hard.

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Here in the 2-day view you can see the smaller trend and how its break lead to the break of the larger one:

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This reminds me of last week’s mini stock panic, which was supposedly because of Dubai World. Funny thing is, as EWI noted, stock futures made their high a few hours after Dubai made its announcement.