SP500 1785 14th November 2013 Important update after yesterday breakout.

ut. - Yesterday, after a dive attempt, the close was very solid and is a clear breakout above the 3Y linear resistance (Black Channel which is probably too slow over next year given the new price levels and regime). - The breakout was induced by Yellen comments (not pure trading and not really anything new if I am correct, but confirming expectations positively). - The breakout is intraweek so far. A close below 1767 tomorrow would leave a bearish trace (speculative at this stage). - The Green Channel well wraps the moderate exuberance and makes sense to be able to reach 1900/1950 around May/July next year (Currently capping around 1800 and climbing 21pts per month. 1825/1845 in January). - The Red Channel would be the surprising extreme bullish scenario (Currently capping around 1830 but climbing super fast, probably too fast and too high already). - Since Mar13, the rally left a resistance band that is currently at 1785 to 1812 and climbing 30pts per month. Probably the most relevant guide in trading. If I am right, this is the last time we are trading close to this resistance band. - Note the May13 rally was 150pts over 5 weeks and the July rally was 150pts over 6 weeks. Here we are up 147pts over 6 weeks (1788 is one of the possible excess targets). - The pain trade would be 2weeks more on the way up to 1808. - Clearly a lot of tension and interest in the next 50pts. Not easy and signals can be traps. Locally the signal is bull. - The end of November is seasonally weak. Other markets: - EURUSD, Gold, WTI not really bull. No evidence this is reflation trade so far. - Bund: started to go up on the risk off tone and carried on going up after Yellen: It might just want to go up ignoring the current bullishness - DAX capped at 9234, 1% higher and that would be a great short. - Nasdaq seems like a great short between here and 3440 (1% band too..). - Nikkei: breaking out but was lagging 9% against SP500 since May13 and would probably not lift the rest of the market even the breakout is confirmed in daily or weekly. Views/Conclusion: - I dont think this is a runaway breakout. - The breakout clearly is concerning, confuses and triggers tight rational stops. - I think this is an excess breakout (1785/1808). - The Green Channel is very likely to retain overall (currently 1800 and 1808 end of November) - The way I look at it: 1% upside left if there is follow through Today/Monday. - The disciplined pivot is 1760. If you want to trade graphs candidly after confirmation: you are long above 1770, short below 1760. - The next absolute exuberance level to short would be 1840. Although I dont believe in it, After breakout it has to be mentioned/considered. - With or without pain before, the bottom green line shall be touched before a proper rally can take place again Trading: - I am still short the DAX at 9173 with stop 9173 and not stopped so far (I ll reconvene if stopped but I might want to take the same position again). - On the SP500, I had been stopped at 1765 2 weeks ago, if 1798/1805/1808, I would short with stop 1815.

Graph on next page.

SP500 Daily Linear The Green channel below is probably the one to monitor (intermediate between the too slow 2010 line and the too fast red one)

Yacine Kanoun