Last Day of 2008

Pre-market futures are up a little on carry-over from yesterday's bump. The SPY may test 90 (900 on the SPX) this morning. Remember that today is the last day (and trading day) of 2008, which means the potential for tax selling (and possibly short-term capital gains selling). Since the year has been bearish for most fund managers, and only recently been flat to bullish, then tax selling will be more in focus than capital gains selling. However, if we get light enough volume today, then both types of selling could affect the market.

I'm looking for a bullish open and a decent morning, but later in the trading day I will watch closely for any year-end selling.

Here is a chart of the SPY:
(click on image to enlarge)

You can see that the market held the gap yesterday morning and rallied, just as I warned was possible. I "paper" traded some nice calls off the gap for a profitable short swing. In fact, there were multiple intra-day stages during the day. I don't expect the same type of day today, but perhaps there is one more stage to go this morning. As per these Holiday conditions, I'm staying with intra-day swings, and I'm not spending a whole lot of time fixating on the market. Enjoy the New Year, have a happy time with family and friends, and all the best to you in 2009.

7:55 am MT: The SPY pushed to 89.50 on the initial morning thrust I was looking for. The market may have one more push in the current 15m - 30m swing, but I would expect that the absolute best case scenario is a ceiling at 900 on the SPX and 8,750 - 8,775 on the Dow. The market may have one more base in the current move, so watch the 15m - 30m charts for a Bull Flag. If the market can build off another base, then I will watch carefully to see if we make a higher high or not. A Double Top intra-day could signal the first stage of tax selling. However, for the the Bulls, so far so good.....

Dancing, Prancing, and Stumbling

Watching this market during Holiday trading is like watching a pro football offensive line do the Dance of the Sugar Plum Fairy.....It's not elegant, it's not pretty, and there's a whole lotta stumbling around. Yesterday did present a nice bearish short swing after the Bear Flag on the 15m charts I warned was possible. Today it looks like the Bulls will push a bit off the end of day rally from yesterday. If the SPY clears 87.50 (and 875 on the SPX) then we might see that drift to 90.00, but a move that big would be a bit more dramatic than I would expect from traders today. But you never know what's in that box of mixed chocolates.....

Here is a chart of SPY, which held support yesterday:
(click on image to enlarge)

This market is more of a prance than a scrum right now, so I'm still watching those intra-day swings. Pre-market futures are up a bit, so we will probably see a little gap at the open. The key to an intra-day bullish swing is if the Bulls hold the gap. We shall see.....

Market Hangs in the Balance

I was looking for about a 55% - 60% chance for a bump up on Monday and Tuesday. That would come, I speculated, ahead of some possible Tax-Selling and a little Short-Term Capital Gains selling on Wednesday, which is the last trading day of the year. That was then, this is now.....

I'm bringing that probability down just a bit because of the warfare going on between Israel and Hamas. I will use the SPY chart as a proxy for the market to demonstrate the possibilities. If we drop much below Friday's lows today then the market is at risk for a Falling Three Methods and a breach of 85 on SPY. That opens the way for a move down to the 82 area. If SPY can move above the 87.50 area (and the SPX can move above the 875 area as I noted on Friday) then it opens the door for the possible soft two-day bump I was speculating about. I think that 92.50 is probably out of reach on a bullish move Monday-Wednesday, but 90.00 is possible if traders drift the market early this week.

Here is a chart of the SPY:
(click on image to enlarge)

Once again, don't look for a lot of momentum this week. It's a holiday-shortened week and I expect light-ish volume on most days except Wednesday and maybe Friday (but I doubt most Big Money traders will want to come back from Wednesday until the following Monday). Watch for short swings this week. I will still keep an eye on the intra-day stuff and not look to hard for a big momentum move.

8:55 am MT: A Falling Three it is.....at least for now. Just as I speculated above, the market was hanging in the balance and could tip down on the turmoil in the Middle East. I came in to the weekend thinking we might see a little bump, but that changed with the conflict in Israel. The SPY (as a proxy for the market) has a good chance of heading to 85 from here.....

Here is an updated chart of the SPY:
(click on image to enlarge)


Here is the 15m chart of the SPY:
(click on image to enlarge)

I don't like the price action for the Bulls, although an intra-day rally back to the 86.50 area is possible. If we form a Bear Flag on the 15m charts, then I might look at a short swing put into the end of the day. Once again, I'm not looking for big momentum but rather little dribblers.....so I'm not exactly ready to get too crazy with a bunch of big trades.

Another Quiet Day

We have tons of snow on the ground and there is a stillness about the winter scene.....kind of like the shock after the dump. The stock market is probably going through much of the same type of thing this week.

Today is completely devoid of news. Any activity will probably be on lighter volume, which means another drifter day. Price action slowed down on Wednesday, which is what you would expect from Christmas Eve.

Here is a chart of the SPX:
(click on image to enlarge)

The market is Intermediate Term Neutral and Short Term Bearish to Neutral. A move above 875 means that the Bulls are probably turning the market north for a few days. A drop below 860 and the Bears are probably headed to 850. A drop below 850 and the Bears may take the market for a ride back down to the 820's. Wednesday was a Narrow Range Day, both an NR7 and an NR4 Inside Day, but I'm taking that with just a little grain of salt because of the light volume. As per our Holiday Trading, I'm not looking for much excitement today. However, activity will probably pick up just a little bit from Christmas Eve.

11:55 am MT: Intra-day Update: This is a mini-tipping point intra-day. If the SPX can rally above 869 again on the 10m - 15m charts then it may take another shot at the 873 - 875 area. The more consistent upward pressure the Bulls can maintain on the market, the more likely that the 865 - 867 area will hold for the day, which is just above a Common Gap on the SPY. If we can get a Rounding Bottom off the gap or a Channel Break on the intra-day price action, then 875 is possible.

Here is a current 15m chart of the SPX:
(click on image to enlarge)

Today has all the characteristics of another drifter day, so I'm not exactly starting a parade.....Most of the price action is fairly narrow and fairly subdued.

Christmas Eve

The stock market will probably continue it's meandering drift today. Remember that the market closes early today at 1:00pm ET. I'm not even going to bother analyzing the activity today. Volume will be extremely light, so spend time with family or friends today, or do something you enjoy this time of year.

I want to wish everyone a Merry Christmas or Happy Holidays. Thank you for your support and involvement in this blog. Thank you for just being a reader.

The new year is a time of change, and change it will bring. I'm looking forward to the next stage, and the next act. Thank you again for being a part of all of this, I wish you all the best this Christmas Season.

Holiday Week Trading Still Adrift

The absence of traders and news will probably continue the Holiday Drift Trading today. There hasn't been a whole lot to do with the market, so I hope you are enjoying this Christmas week with family or friends. There were a couple of nice intra-day Bear Flag setups yesterday, but the overall direction of the market is still a light volume drift (mostly down so far).

I don't have much to say about trading other than this: if you are directional trading options, you will still want to look only for good intra-day signals and take the short swings.

Here is a chart of the SPX:
(click on image to enlarge)

The Bulls decided to hold the 850 (857) area for now. the Wedge has been busted, so the market is at risk for a selling period back down to the 820 area, but I doubt there are enough traders hanging around to accomplish that kind of momentum today. With the pre-market futures up slightly, it's possible that the market tests the 880 - 885 area early in the day. A break above 887 would lead to the possibility of a move back up to the 920 area, but again, there probably aren't enough traders hanging around to accomplish the move. Maybe we will see a light volume bullish drift today, but it may be more fun/practical to spend time with family or friends today than it will be watching the paint dry on Wall Street.

Santa Claus Drift + Light Volume Drift =

This week often follows a pattern of light volume upward drifting with soft rallies. Big Money is usually already on vacation and the trading desks are being run by the third string. Throw in a little Santa Claus emotion and we have the recipe for a floater day, and possibly a soft, floater week.

Pre-market futures are perhaps already reflecting that sentiment with a flat open. The end-of-day chart on the SPX from Friday has the price points to watch out for today. I will have a soft upward bias to the week - not because the charts or the fundamentals dictate the bias - but because of experience with Hedgies and Retail traders on light volume weeks.

Here is a chart of the Dow to go along with the SPX:
(click on image to enlarge)

The 8,500 area is important to sustaining the current consolidation. If the Dow drops much below 8,500 then it changes the holding pattern and puts the market back into an intermediate term neutral to slightly bearish posture. If we get upward drift today, I don't expect traders to push the Dow over 8,750. We'll see how this week goes.....

12:15 pm MT: It looks like the drift is down today. The Dow has dropped below important levels and is likely headed for some more selling intra-day. It doesn't appear like the Bulls are interested right now, so this could continue to slough and grind for the remainder of the day. I saw no catalyst to buy calls today. Instead, there have been two nice Bear Flags intra-day for puts. Market volume will probably get softer the closer we get to Christmas.....

Options Expiration Puts More Volatility In the Market

7:45 am MT: Pre-market futures were up, just as I speculated in VC last night (for those of you that attended). RIMM and ORCL gave Tech a little boost. Meanwhile the auto bailout chatter picked up again this morning for a formal announcement about $17.4bTARP water being thrown on that fire.....

The net result was a modest boost in futures and a wiggle out of the gate just as I warned last night. I also said to expect GE selling to keep pressure on things, which is also what just happened right after the wiggle. It didn't help that Standard & Poors lowered credit ratings and outlooks for four more financial institutions: GS, WFC, JPM, and BAC.

Right now, the market is settling out a bit after the initial wiggle. Watch to see if we get a Reverse Head and shoulders on the 5m charts. The Dow needs to clear 8,725 in order to confirm the reversal. Remember, the Dow is the lagging index because of GE, so you will want to keep an eye on it today, but use the SPX most of the time since it will probably lead the Dow.

I speculated yesterday that the market would be back and forth quite a bit today because of the huge crosscurrent effect from GE, financial sector credit downgrades, and Energy and Commodity selling (bearish), and low oil prices, low mortgage rates, bad economic, earnings, and employment news priced in already (bullish).

In addition, today is Options Expiration, which typically leaves the market with a lot of volatility and swings intra-day as traders exercise, uwind, or roll out positions. Look for the increase in volatility to peak early in the day and in the last 20m before the close. And remember, volatility doesn't always mean sharp moves to the downside, it also means tossing sharply back and forth, or even sharp moves to the upside. The key to expected increases in whippy behavior is to dial it down a time frame or two. Therefore, keep your focus on the lower time frames for swings (5m - 15m charts) today. It may be that a longer swing presents itself, but take partial profits a little earlier on a potentially moody day like today.

8:05 am MT: It looks like the market wanted to go right into that neckline I described earlier (8,720 on the Dow and 897 on the SPX). If you took the counterswing on the 5m charts off the first bounce carry-through, you would offload half your profits right now and see if the Bulls can push through the neckline.

8:09 am MT: If the SPX can push through 897, then you would take the rest of your profits on calls right in the 899 - 900 area if the SPX pushes that far. This is a loose Reverse Head and Shoulders, so it may not stick the whole day, in other words, it's not a signal that the whole day will go bullish.

8:11 am MT: The SPX broke through 897 and ran right to the 899 - 900 area immediately, just as I wrote above. Here is where you would lock and walk on any short swing calls on the 5m charts. It might overshoot to 901 - 902, but I would be happy with the move. I'm giving more detail this morning because I want you to get in the rhythm of the short, intra-day swings on the 5m - 15m charts to stay profitable and stay out of trouble on a day like today.

8:16 am MT: If the SPX can cross 905, then it sets up an Ascending Triangle on the 2hr charts and probably changes the posture on the day. It basically erases the narrow-based GE selling that caved in the market yesterday and puts us back where we would have been if GE had never happened. We'll see if the market can make that adjustment.....

A cross of 905 and I am looking for the next test back of 900 to pick up a second call position and swing it up into the 910 - 914 area. I would keep that stop tight (897 area at the lowest) just in case the market decides to go whippy again.

8:22 - 8:28 am MT: it looks like things will peak out here in the 903 area, which means a probable test back to that 897 neckline break I wrote about earlier. Use the 5m charts to guide you on the loose Reverse Head and Shoulders reversal and potential neckline test. If the market holds high and tight in a Bull Flag off this move, switch over to the 10m charts and look for the next upswing on that time frame (possibly starting around 897 - 898 and finishing around 907 - 908). Remember, on a short swing, if the scenario happens, take half your trade off at the 903 area and bring your stop to breakeven so you can't lose money on the trade.

8:29 am MT: One last thing: Keep your eyes open, this is a day for all kinds of potential gyrations. Traders kept the market right here so the 60m candle would close (at 8:30 am) near its highs and give the appearance of a bullish reversal on the 60m charts (One Soldier pattern or Ascending Triangle - like on the 2hr charts). In other words, the bulls got just what they wanted. I'm always a little leery when things happen too perfectly on a day like today.....

That doesn't mean I don't want to take calls on the next pullback on the 5m or 10m charts. It just means that I'm more willing than ever to take partial profits early, and then see if this day is really going to tip to the Bulls with a run up to yesterday's highs. I want to make money on calls if that scenario happens, so I want to be in the game, but I want to manage that game very carefully.

The mid point of that Long Body 60m candle that just formed is 895. So a drop below 895 and this was probably just an options expiration pump and dump. I will stay connected to the 5m - 15m time frames today (despite the formations on the 60m and 2hr charts), but puts just got a lot harder because of what just happened on the 60m bar (which is just what the Bulls wanted after yesterday's GE selling cave-in). This was forming up to be a no-brainer for the the Bears early in the day, and the Bulls just blew that up for them.....which is why I imagine the Bulls are grinning like Cheshire Cat's across the aisle at the Bears right now.....

8:45 am MT: The SPX just crossed 905, so this got even tougher for the Bears. You can get a feel for the steep Reverse Head and Shoulders on the 5m charts or the V-Bottom on the 10m or 15m charts. It's not the norm, it means that the GE bogey is probably getting corrected back out of the price action. I don't know if it's real or not, but I would be willing to take a shot at it (calls) on the next 10m or 15m chart pullback, just as I wrote above.

I am going to go away now for awhile. I wanted to get everyone in synch with things early in the day, so stay on top of things now if you're trading this. I will check in later and give a market update.

One last thing, if the pullback (if we get a pullback) on the 10m or 15m charts comes all the way to 895 instead of holding 897 - 898, then DON'T look for a higher high, or even an equal high. If you take calls on a pullback that deep (which is ok but not ideal) then offload half the trade at 900 and get your stop to break-even. If it gets back to 902.50 - 903, offload most of the rest and only save a small amount for a potential higher high. Ideally, the pullback holds 897 or above in order to make a higher high and take a shot at 907 - 908.

Here is a 9:00 am MT chart of the SPX on the 10m charts so you have an idea of what I'm yapping about:
(click on image to enlarge)

9:01 - 9:04 am MT: So far so good on the 10m chart pullback. Again, this was a V-Bottom on the 10m - 15m charts, so it's a little tricky, but that 60m bar should hold for at least one more swing (on the 10m bars), even if it's a partial and not a full swing. The SPX is at 899 right now, so this area is where I want things to be fairly orderly (897 - 899) in order for the market to have a shot at a higher high, otherwise the swing back may not go as far. We shall see.....

Ok, now I'm going, all the best until later in the trading day.

1:45 - 2:00 pm MT: Late Day Update: Back and forth and back and forth we went. This was not that unusual for Options Expiration. After the failure at holding the 895 - 897 area early in the day, trading signals got progressively harder throughout the day. There were several decent signals today, but all of them ended up being on the 5m charts. Today's activity was something I prepared myself for mentally yesterday, so the lack of signals on higher time frames, and the back and forth price action was not a surprise for me.

Some days feel like a lot of spinning without getting anywhere. Options Expiration has a tendency to be one of those days that you have to put an asterisk by when you look at the charts. A lot of gyrating, and then at the end of the day, the market finishes fairly flat.....

Here is the end-of-day chart on the SPX:
(click on image to enlarge)

The net result on the charts is the market is continuing to tighten down as traders decide if they are going to try push for another stage in the Santa Claus Drift (I decided I would go with the German spelling this time). It's pretty much a toss of the coin whether or not we go to the North Pole or South Pole next week. A move above 905 on the SPX and we're probably headed to the North Pole to see Santa. A move below 880 on the SPX and we're probably headed to the South Pole to play with the penguins. Until then, have a great weekend.

One Final Reminder: I won't be doing VC this evening.

Jobs, Cars, and Earnings

Pre-market futures are up on two specific things: FDX beat soured earnings expectations and is trading up a bit before the open, and Weekly Jobless Claims came out slightly better than the catastrophic expectations.

The market is catching a tailwind off the news. It should be enough to gap SPY right back on the path to yesterday's high around 92.50. The gap should take SPY to 91.60 or so, and then I speculate the market will make a run to yesterday's high early in the day. From there, if the Bulls can't push through, then we could stay tight again for another day. You can refer to the chart and Watchlist I posted last night for SPY and some stocks. Also refer to the day before's Watchlist. Resistance on SPY is 92.50 and support is 90.00. Those are your pivot points on the short term (support and resistance, not the technical indicator). So a move above 92.50 clears the way for a move to 95.00, and a move below the 90.00 area clears the way for a drop back down to 87.50.

Here is a chart of the SPX index itself:
(click on image to enlarge)

The price points are similar, just translated up. In order to stay bullish short term, I really don't want the SPX dropping below 895, and a drop below 892 is enough to keep me clear of calls until the next signal. If the market pushes above yesterday's high, then a move to the 950 area is possible over the next couple of days.

As always, we shall see.....

11:55 am MT: Intra-day Update: The market is at a critical tipping point intra-day. If the SPX drops much lower than this 898 area then it's at risk for confirming a flat Head and Shoulders on the 30m charts.

If the Bulls can push the SPX back above 905 in the next few minutes, then the consolidation flattens out enough to stop the reversal. It looks like the trading day will be a consolidation day at best and a bit of a selling day at worst. The Bulls are very disinterested to this point, so the drift on the day is downward.

The market is starting to form an ugly trading pattern on the Daily charts (or beyond the ugliness of the Fall, or more choppy than violent, or whatever can be said about the past 3 months.....). Anyway, we are getting very quick bullish moves followed by long consolidations of a week or so. In other words, we get 1-2 days of action followed by a week of being forced to go back to the 5m and 15m charts. It's a bit nasty, but it is what it is in our fickle market. The key is identifying the pattern, and the pattern right now is "no follow-through", which means you trade the 30m to Daily swing for 1-2 days and then switch right back to the 10m - 15m swing for the following several days to week. It's a bit nuts, but you can still make a nice cheese ball with nuts, so nuts it is.....

The Consolidation After the Adrenaline Rush.....

Pre-market futures are down more than I expected, but not enough to surprise me anymore in this market. Once again I'm glad I locked and walked on a nice profit intra-day (yesterday) and didn't hold overnight. There isn't any specific catalyst to the morning, but MS is down a bit after posting earnings this morning - which may be a consolidation of yesterday more than anything. In fact, the whole market looks like it wants to lay down for a bit after the rock concert yesterday.

Here is a chart of the SPY:
(click on image to enlarge)

I don't want to buy calls if the SPY goes much below 90.00, so we'll see if we get a fourth gap down and pop in the past two weeks. For now, I am going to take things cautiously this morning. I was looking to go in just a tiny bit heavier this morning, but with the futures down this much, I'll treat today as I have much of the past couple of months. Still, if the SPX can overcome the gap, it has a chance to rally into the 9,400 - 9,500 area. As always, we shall see.....

I posted a watchlist yesterday, and some notes on my schedule this week.

5:00 pm MT: Market Wrap: Today was a pure consolidation day. It looks a little Harami Cross-ish on many charts, which I don't like. However, using the SPY as a market proxy, as long as SPY holds above the mid point of yesterday's long day and also above today's low - both in the 90.00 area - then the market has a chance for another leg up in the current upswing. So I'm cautious on calls on a drop much below the 89.75 - 90.00 area, and I'm bullish on calls on a move above 92.50 that would open the door for a move to the 95.00 area.

Here is a chart of SPY:
(click on image to enlarge)

Here is a list of strong Bullish Movers in addition to the Watchlist from yesterday (some of these stocks are from yesterday's list). Also, yesterday's list is still in play for me as well.

Tech/Alternative Energy: FSLR, SPWRA

Materials/Construction:

Energy:

Cyclicals: WHR

Retail: DLTR

Financials: BEN

Benny Pumps Up The Market

Happy Fed Day.....pre-market futures seem to think so anyway.....Fed Funds Futures are still pricing in a full 50bp cut to half a percent and a 65% - 70% chance of a 75bp cut to .25%. Traders hung around yesterday - not letting the market drop beyond critical levels - as they hunkered down for a nice meal of cheap money today.

BBY released earnings this morning that beat expectations. The stock is trading up over 10% pre-market and is likely to give the Retail sector a tailwind this morning.

About the only thing that could throw water on the short term excitement is a smaller than expected cut, or a catastrophic earnings report from GS, which is set to release numbers in a few minutes.

6:35 am MT: I just caught the beginnings of the GS report and it looks like the stock is trading up 5% - 6% immediately after the release, so the initial response is bullish. This sets the tone for a rally ahead of the Fed. I speculate that the SPX will open in the 880 area this morning and make a push. I won't be surprised by a move to 900 ahead of the FOMC announcement at 2:15pm ET.

Here is a chart of the SPY:
(click on image to enlarge)

6:45am MT: It looks like GS has settled in the plus 3.5% area for now.....

I speculate the market will move up ahead of the Fed and then do the usual volatile stuff after. At the end of the day, if traders get the rate cut they want from Benny, I won't be surprised to see the SPX in the 910 area, and perhaps higher. If traders don't get what they want then the market will drop back down to support levels, but may hold those levels based on the better than expected earnings reports from BBY and GS.

1:50 pm MT: If any of you ever doubted whether or not the Banks were trying to get inside Benny's head.....doubt no longer.....He's a Rock Star on the big stage.....he's the anti-Yoda.....and here's his theme song for the day:

Crazy Train:

Needless to say, I've been making hay with the "paper" calls on DIA and SPY today.....

4:00 pm MT: Market Wrap: Traders got what they expected, a wild, dramatic move by the Fed. The result was a big bounce in the market today. I speculated this morning that the SPX would move to the 910 area on “good” news (that’s a foofy term to me these days). Traders got their cut and the SPX closed at 913.....

The best case scenario for the current swing is a move up to the 940 – 950 area on the SPX by Friday afternoon. I had a couple of nice DIA and SPY “paper” calls today. On SPY, I picked up a 4% gainer before the Fed, and a 26% gainer after the Fed. On DIA, I picked up a 7% gainer before the Fed, and a 24% gainer after the Fed. I sold the last of the calls right near the high just before the close.

If the market doesn’t gap away tomorrow (which I don’t expect), then I will lather, rinse, repeat. We shall see how this all goes on Thursday and Friday.....

Here are some interesting Bullish Movers today:

Financials: PRU, MET, ALL, NDAQ, GS, ICE, STT, BEN, AFL, CME

Tech: LEAP, QCOM, PCLN, IBM, BIDU, FSLR

Railroads: NTRS

Retail: RL, KSS, BBY, ROST, RTH, AMZN, BBBY, GME

Drugs/Biotechs: GILD, MHS, GENZ, MCK, GSK

Chemical/Agriculture: MOS, BG, CF, POT (Energy and Commodities were not as exciting to me today)

Gold: AEM, NEM, GG, ABX (Gold is a bit extended short term)

Steel/Copper: NUE/FCX

Note: SUN is in an Ascending Triangle even though the rest of Energy is somewhat ambivalent. Also note that SPY, DIA, and the Q’s are bouncing.

I like the move in Insurance (Financials) and Retail the most, but there are a few other stocks that look interesting. I’m not looking to do anything tricky right now. If I see some nice intra-day setups off the current bounce, then I will speculate on that, but I’m not getting loaded up to my eyeballs. Nevertheless, there are some interesting bullish movers that might carry through for 1-2 days.

4:30 pm MT: One final note: I will be subbing on the AT Capstone tomorrow morning. Since I am teaching the class in the morning, I will be an hour late on the VC. I'm also taking Friday off, so I won't be doing the VC Friday.

Cars, Cuts, and Banks, Oh My

Pre-market futures are up slightly, but the market is set to open mostly flat this morning at the start of the 2-day FOMC meeting. Toyota is cutting sales goals and traders are awaiting further news on whether TARP funds will be used to bail out U.S. automakers. And finally, the news can't be complete without something from the Financial sector, so MS looks like it may post a $1b loss for the quarter.....Cars, Cuts, and Banks, Oh My.....

Remeber that the market has gapped down and popped back up through the gap three times in the past eight trading days. That means that traders are refusing to give in to the Bears despite the news. Much of the buoyancy is probably related to the other-worldy rate cut that the Fed Funds Futures are pricing into the market. Right now traders are expecting a 100% chance of a 50bp cut from 1.00% to .50%.....and if that isn't enough, the FFF are pricing in a 72% chance of a 75bp cut down to .25%. I'm excited for the day when the Fed pays us to take the money off their hands.....or maybe not.....

Here is a chart of the SPX:
(click on image to enlarge)

You can see the Hammer from Friday, coupled with the anticipated Fed cuts, is putting a bid under the market. Traders are acting as if they want to push the SPX back to the 918 - 920 area. I suppose if the rate cut is big enough, then the more myopic traders will try to push the market back up to the 950 area before anyone stops and considers just what that means. But like I always say, technical analysis is the observation of human behavior, so if the trend is up, you go with it. Never fight the tape.....

Market Implodes Early and Comes Back Late

Pre-market futures are down sharply on the news that the U.S. Senate voted to reject a $14b bailout of American Auto-makers. In addition, MER announced that it will be slashing up to 35k jobs over the next three years, which sent additional shivers down the backs of the Financial sector.

Yesterday's late-day sell-off was precipitated by a live CNBC interview with JPM CEO Jamie Dimon in which he stated that business at JPM was horrible in November and terrible in December. The hand-wringing comments tanked the Financial sector - and with it the entire market. The follow-up comments after the close by MER along with the rejection of the auto bailout sent the market futures straight into the toilet. The timing and manner of the release of the "bad news" by JPM and MER is suspicious to say the least when I consider that the Fed is meeting next Monday and Tuesday to determine if it will cut interest rates from 1.00% down to .50% or even .25%, which is mind-boggling to me.....

As far as the auto-makers go, it appears that many traders, politicians, and people view the lack of a bailout as an end-of-the-world scenario in which all life as we know it will cease, the earth will stop spinning on it's axis, and all humanity will be flung like a giant flaming fireball into outer space. I may be one of the few people on the planet that thinks a $14b bailout is nothing compared to the trillions of dollars that have been thrown at nothing the past two months.

The market will implode this morning, auto stocks will implode, and traders, who are human beings with human emotions, will be in a state of panic, fear, and hysteria. It will be interesting to see if the "Fundamental Values" or Beardicat Zone will hold in the next couple of trading days. It would be nice to see if it will hold without government intervention, but I strongly suspect that the Fed/Treasury will make an "announcement" about many more billions of dollars that will be "allocated" to some area of something. In addition, I fully expect Benny and the Feds to fall for any ploys of the Banks to get them to reduce interest rates to almost zero, and perhaps send them a few hundred billion dollars just to soothe the pain.....

7:22 am MT: Well, that didn't take long.....It appears that the government is looking to use TARP funds for auto-makers.....That has pulled the futures back from the abyss a little.....

I don't know why - since trillions of dollars was already being thrown around like Halloween candy - government officials didn't take that route in the first place.....

I'm going to try and make some sense of all of this on the charts, but here's the motto of the day: be nimble, be quick, and watch your intra-day candlesticks.

My best guess is that the SPX is going to gap down to 850 at the open, which opens the door for a move down to 820 if traders don't like what they hear today. I speculate we may get a little wiggle back out of the gate after that news just hit about the TARP funds, but there will be a lot of residual hysteria out there anyway, so anything goes today.....

Here is a Daily chart of the SPX shortly after the open. It's wiggling just as I suspected:
(click on image to enlarge)


Here is a Daily chart of the SPY so you can see the gap:
(click on image to enlarge)


Here is a 5m chart of the SPY showing the wiggle out of the gate back to old support/new resistance:
(click on image to enlarge)

You can see that the market has broken support and is hovering just above another level of support. I suspect the selling isn't over and the SPX could visit the 840 area today, but we shall see.....

7:55 am MT: the market wiggled back early out of the gate. It appears that the auto bailout news may hit an impasse in traders minds. In other words, the news is no longer bad or good since the Senate rejected the bailout but the White House is probably going to use TARP funds to "bail them out." It may be that traders stay fixated on autos like it's actually news, but I suspect that they will start shifting back to the bad news market drivers in the Financial sector that started with JPM, continued with BAC, and may still be coming with Bank XYZ.....

I think the focus will start shifting to the latest degree of nastiness in Financials, and therefore the market. So far, traders are buying the gap this morning. I imagine that a large degree of their hysteria has now been replaced by relief. The best thing that I can say about today is, stay nimble, take only the best signals, and play the intra-day swings. I'm still in the mode of not wanting to hold a full position overnight.

12:00 pm MT: Intra-day Update: The market remains rangebound off the gap with a slight upward drift. It looks like it is trying to bounce again as I type this. If the next bounce on the 10m charts has a lower high then the SPX may leg back down into the 850's. So far, the bulls are holding the channels on the daily charts. I'll show a chart of the DIA intra-day and a chart of the Naz on the daily time frame to demonstrate the price action.

Here is a 10m chart of the DIA showing the current bounce within the rising Broadening Pattern:
(click on image to enlarge)

Here is a Daily chart of the Naz showing the channel support area:
(click on image to enlarge)

The market has had every chance to sell off today and it's not. If the Bears can't take it down in the next hour or so then the Flag pullback consolidation on the daily charts will maintain an orderly behavior that will make it possible to play calls next week on a bounce. If the market rolls over early on the current 10m chart upswing then it may sell down 15pts or so on the SPX and it will need to come back late in the day in order to maintain the Bullish integrity of the channel. Once again, it's been a strange and volatile day in the market.

Market Gets Ready For Next Move

Pre-market futures are down a little on a bad Weekly Jobless Claims number, but traders appear to have priced in "nuclear implosion of employment" already, so they are content to trade back and forth in a perceived "fundamental zone." Because yesterday was a narrow range day, nothing has changed technically other than the Bulls continue to hold Monday's gap. I am re-posting the same two charts, the SPX and the SPY (I fixed the error on the SPY labeling). The same numbers and the same technical concepts are good for today just like yesterday.

Here is a chart of the SPX:
(click on image to enlarge)


Here is a chart of the SPY:
(click on image to enlarge)

The minor gap down this morning will still be in the three-day consolidation range. I would like to see the bullish candlestick continuation pattern on the market resolve itself to the upside today, otherwise I will be more suspect about a possible Island Reversal. In other words, the Bulls need to assert themselves again in the face of very bad news in order for the current swing to take another leg up and finish it's move. Because of the nature of the news, and because of the current pattern on the market, if the Bulls do push the SPX above 920, then the move to the 950 area could be pretty quick and pretty sharp. The same goes for an Island Reversal type of pattern or a failure of the gap on a drop below 875 - 880. A drop through those areas could lead to a quick sharp move down to the 845 area.

As always, we shall see.....

11:45 am MT: Intra-day Update: The market continues to hold the gap, which should be making the Bears more and more nervous about how things will go later today and tomorrow. The Pennant on the SPY is taking on more of a Nautical Pennant formation. How ever you want to look at it, it's holding high and tight, which is a good sign for the Bulls so far.....

Here is a daily chart of the SPY showing the Nautical Pennant:
(click on image to enlarge)

Here is a 60m chart of the SPY showing the consolidation channel:
(click on image to enlarge)


Here is a daily chart of the SPX showing a regular Pennant:
(click on image to enlarge)

I want to see a Goldilocks Consolidation, not too short, not too long.....If the market can make a push off of the intra-day bounce back and move above the highs of the day it might start shaking the Bears off the tree.

Tipping Day

Pre-market futures are up a bit on basically no good news, unless you count the car bailout as new news.....The SPX is probably going to wiggle into the 900 area early out of the gate. There isn't much to say about the market, but there is a bit to say about the charts.

The SPX is tightening a little, and could stay range-bound between 885 and 915. If the Bears take the SPX down through 880 then the upswing is probably done and the market could crunch for a bit down into the 850 area, or lower into the 820 area. A break above 920 would open the way for a move to 950 and a confirmation of the mini Reverse Head and Shoulders. That would also open the door for another swing, on a second stage, back into the 1,000 area.

Here is a chart of the SPX:
(click on image to enlarge)

The SPY, which shows the market gaps, is in an Upside Tasuki Gap formation, which is bullish. The SPY needs to hold the gap above the 87.50 area (which is about that 880 area on the SPX) in order to maintain the pattern. A drop much below the 87.50 area and the SPY could consolidate back into the 82.00 area. So I want to see the SPY hold the 87.50 area and the SPX hold the 880 area (giving it a little wiggle room) in order to still look at calls in the current upswing.

Here is a chart of the SPY:
(click on image to enlarge)

The Naz is in a bullish Side by Side White Lines pattern, which is just a stronger variation of the Upside Tasuki Gap. In fact, a lot of stocks are in some variation of the Candlestick Gap Contiuation Patterns. So this market has reached a tipping point. If it drops through the gap then the current upswing is probably over, at least for another day or two of consolidation. If the market holds and consolidates the gap another day, then it builds up some nice bullish pressure. And if it pops the pattern we could see a 1-2 day upswing continuation into the end of the week. The odds favor the bulls slightly as long as we hold the gap - that's your tipping point.....

Consolidation Morning But Swing May Not Be Done

After a 300 point day Dow day yesterday, traders are set to pause this morning. However, the upswing may not be over just yet. The market continues to absorb bad news and basically swing back and forth in a valuation zone between the 8,000 and 9,000 area on the Dow - with extremes in the 7,500 area and the 9,500 area.

The "bad" news today is lowered earnings guidance from BRCM, DHR, FDX, and TXN. The "good" news continues to be the drop in oil prices (now in the $43's) and the drop in 30-year mortgage rates (low 5's). The market pretty much knows the good and bad right now and traders are simply pushing back and forth in technical swings.

Here is a chart of the Dow:
(click on image to enlarge)

You can see that the Dow is fighting with the resistance zone I drew out for you several days ago. If the Bulls win then it's off to the 9,400 - 9,600 area. Watch the gaps on the DIA and SPY, if those get imploded then the upswing is likely over.

Here is a chart of the Naz:
(click on image to enlarge)

You can see that the Naz wants to make a push to 1,600 but the Bulls will have to overcome the TXN and BRCM news this morning to do it. The same story goes for the Naz, if the Bulls win today then we will probably see 1,600. If they push it beyond 1,600 then it's off to 1,675. If the gap gets imploded below 1,500 then it's right back down to the low 1,400's.

It looks like the market is in the late stages of the current upswing. Certainly the Bulls will take a pause this morning, but they may try to make one more push before it's done. When the push comes, if the Bears slam it hard, then that's an early warning to watch out on any bullish calls.

We'll see who wins the battle between the Bull and Bears today.....

Technical Bounce Gaps to Next Stage

Pre-market futures are up sharply as traders finish out the first stage of the technical bounce that started on Friday. Once again, most of the news has been bad: DOW is cutting jobs, MMM guided down and is cutting jobs, and MET is guiding down. The new White House has decided it will focus on maintaining the stimulus plain (bailout) instead of decreasing the deficit.

Despite all the news, the Dow is set to gap up very close to the next level of resistance. I speculate that traders, who are creatures of habit, are basically "having" a Santa Claus rally despite the fact that there is absolutely no catalyst for a traditional rally (#1 reason is Mutual Fund Inflows - and the market has had huge Mutual Fund Outflows, and will likely continue to have outflows for several more months. And #2 reason is Christmas Retail Spending, and retail spending is down sharply with most of the current consumer spending coming on deep retail discounts). I've learned to never discount human emotion in trading no matter what the fundamentals say.....so bullish for now.....

Here is a chart of the Dow:
(click on image to enlarge)

It is important for the gap this morning to hold and not be an exhaustion gap right to resistance. It's likely that the market gaps and then tests the 8,850 area some time this morning. Eventually this current swing may break 9,000 and head for the 9,400 - 9,600 area. If the gap fails then the swing will fall back into consolidation and the upswing will probably be over.

Jobs Report is Nasty Bad But Market Comes Back

The Employment Report came out with a Non-farm Payrolls loss of 533k for November, which was much more than the 320k expected. In addition, October was revised down from 240k to 320k. The Unemployment Rate came in at 6.7%, which was slightly better than expected. Pre-market futures shot down right after the report, but have since recovered some of the losses. European markets are down as well.

It appears that a shocking, catastrophic Jobs Report number has been somewhat priced in to the market. So traders will probably take the market down a bit today, which will be part of a technical move, but it doesn't appear that traders are going to implode the market off the bad number this morning.

Here is a chart of the SPX just after the open:
(click on image to enlarge)

You can see that the SPX is narrowing down in range. Today's early move will probably head down towards the 815 area, but the selling has not been horrible. If the SPX drops through 815, then it is likely headed towards the 790 - 800 area. If the market turns around, then the SPX is likely headed back towards 875 - 885. Bulls may try to make a push today, but there just doesn't appear to be anything that will give them a sustained tailwind. I speculate the market will tighten at best, and sell-off at worst. That means that if you look at any Bullish trades today, stay nimble. It may be that the market pushes and crunches for awhile this morning. I'm guessing that the best signal of the day will be a lower high on the 30m charts on the SPX, the second best signal of the day will be a break-down of the 832 area, and the least likely, although possible signal will be a strong move back up above 855 - 857 that opens the door for a move to 875.

12:15 pm MT: Intra-day update: Well, it looks like it was door number 2, which was a break-down through the 832 area and a move right into the 815 area. I speculated above that we would see the 815 area in the morning, which is what we got. We also got a double-Hammer support bounce off that 815 area on the 10m charts and a move up intra-day. At this point I want to see if the SPX will make a higher high on the 10m charts. I speculate that the Bulls will hold the line until the trend breaks on the 10m charts.

Here is a chart of the SPX showing the intra-day bounce right off the support line that I posted earlier:
(click on image to enlarge)


Here is a chart of the SPX showing the 10m chart trend that needs to break before the Bulls are done intra-day:
(click on image to enlarge)

I won't be surprised to see some weekend selling before the close, so continue to stay sharp right into the end of the day. We'll see how this closes.....

Another Day Another Gap

Stock market futures are down pre-market again. Traders have gone both ways with a gap down the past week. Some of the gaps have led to sell-offs (Monday), and some have been overcome by the Bulls (yesterday). In such a newsy environment it's almost irrelevant why the futures are down, but it is important to keep in mind that traders will probably do their last pricing-in of employment trends before the big Jobs Report tomorrow.

The trend in fundamentals is down, so the trend in the market is down. Companies continue to slash earnings and jobs. The latest downward guidance in earnings came from ADBE, MRK, T, DD, and NOK. The latest job cuts announcements came from T and CS. Speaking of jobs, the weekly Initial Jobless Claims number was actually better than expected, but still a pretty ugly number of 509k. Futures dropped sharply on the news, which means (as I suspected) that the bump the past two days has been a technical bounce, and a sour Jobs Report hasn't been fully priced into the market. That means that any type of strong rally today is probably at risk for late day selling as traders push and shove and position themselves ahead of tomorrow's report.

I know I keep saying this, but stay nimble today.....

Here is a chart of the SPY:
(click on image to enlarge)

You can see that a min-Reverse Head and Shoulders may be forming. In the short run, traders may stay trapped in a range ahead of the Employment Report. There is resistance at both sides of the gap at 87.50 and 88.50 (875 and 885 on the SPX), and 88.50 is also the area of the sloping neckline. A move above 90.00 would be fairly bullish and could open the door for a continued move up to the 100.00 area. The first short-term support is the 85.00 area and then the 82.00 area.

As always, we shall see.....

12:00 pm MT: Intra-day update: This is a key area intra-day. The Dow is trying to build off a 3rd Stage Bounce on the 30m charts. If the Dow exceeds the 8,630 highs then it will have succeeded. If it rolls over and drops through 8,470 then it will fail and traders could be induced into some Employment Report selling.

12:10 pm MT: The Dow is making the run to 8,600 as I type. I'm still not that excited about the convergence of the 4-Day price pattern on the Daily Charts and the Employment Report tomorrow. I speculated that today would be a range-bound day, which often leads to a Narrow Range Bar or Doji. Well, so far that's exactly what were getting.

Here is the chart of the Dow:
(click on image to enlarge)

I'm just not that enthusiastic. There really weren't any good intra-day swing setups this morning unless you were playing the 5m charts and were being extremely nimble. That's the nature of range-bound days. We are getting a mini Double-Bottom on the 10m charts and a Bull Flag bounce on the 30m charts, so there is the possibility of a small call play right here, but I'm not super excited about it given the Daily Charts and the Employment Report. We'll see what happens next.

Earnings and Employment Trends Keep Things Squishy

Pre-market futures are down sharply as traders keep chewing on more bad news. Although none of the news should be a surprise, and much of it has been priced in to the market, the relentlessness of the the bad news drumbeat is keeping the market in a dour mood. RIMM started things off by cutting their earnings outlook. Then the ADP employment report came out worse than expected, which will make traders a bit more apprehensive about the big Employment Report on Friday.

Yesterday's price action was full of mood swings with the Bulls showing up in volume throughout the day. That means that, as usual, the market is still a tough read that requires nimble trading and strong discipline. I had two nice 9% put "paper" trades intra-day yesterday, and I will probably be looking at puts again today. But I won't take my finger off the trigger because of the erratic nature of the price action.

Here is a chart of the SPY:
(click on image to enlarge)

The SPY (and SPX) is set to gap open right about where it gapped open yesterday. I speculate it will stake a quick stab at the two-day lows at about 82.00 (820 area on the SPX). From there, a break of 81.75 probably means a drop to 79 - 80. If the market recovers off the gap down this morning and clears yesterday's high then it is likely headed for 87.50. I'm still looking for the swing down to reach a little further so I will be looking for puts, but I'm staying nimble today just like yesterday.

Wiggle Bounce Early

Pre-market futures are up early on a relief bounce, or wiggle, from yesterday's huge sell-off. There's a little blah blah blah in the news that the elevator analysts are using as fodder to explain it away, but mostly this is just a technical counter-move off yesterday's price action.

Here is a chart of the SPY:
(click on image to enlarge)

Translating the SPY to the SPX, here are the numbers: the next support down, short-term, is in the 800 area. A breach of 800 could lead to 775, and then the 750 area. If I play puts on the wiggle, I don't want the SPX (or the market) going above 850. The next big economic number will be the Employment Report on Friday. We'll see if we get a wiggle and drop this morning or a whipsaw. Another day, another volatile market.....

The Drift is Over

The One-Way Little Guys are done drifting the Holiday Market and the current upswing looks like it will attempt a second gap down roll-over. It looks like concerns about slowing growth in China and the rest of the world are the catalyst. However, if you have been following the current upswing, you know that it was time for a rollover last Wednesday with the gap down - but the One-Ways were too excited about being in charge of the market with all the Big Money on vacation and they did what they usually do, drift the market up on light volume. Today they may not be so lucky. The time is right for consolidation anyway, and with Big Money back from vacation the One-Ways won't be able to skew the price action with short-covering and day-trading.

The big X-factor in today's trading is the ISM Index, which will report 30m after the open this morning. If the numbers aren't catastrophic, the real Bulls may take back over the market. Most analysts are looking for a reading of 38.0, which is very low, and very recessionary. So even if we get a number around 40.0 - 41.0, it may not be enough to push the Dow above 8,830 - 8,850, which would be my stopping out area for puts.

Here is a chart of the Dow:
(click on image to enlarge)

You can see that a move above 8,850 would probably open the way for a move to 9,000 and then a surge into the 9,200 area. However, barring a great ISM number, and given the swing is probably ready to consolidate, I am looking for the Dow to reach down to 8,500 today, and then perhaps the 8,250 area in a downswing over the next several days. The SPX and the Naz are more at risk because those indexes are Intermediate Term Bearish, whereas the Dow is more Intermediate Term Neutral. The market still has to create a solid bottom from the sliding and crunching bottoming out process that it is fighting through. The SPX and Naz are still at risk for lower lows, which would be somewhat devastating to the Bulls.

For today, I am looking for puts. We'll see what happens with the ISM.....

4:30 pm MT: Market Wrap: Silly me.....I thought the Dow dropping to the 8,250 area would take a couple of days.....then I remembered the now, now, now world we live in and presto - we do it all in one day!

Ssssoooooooo, I was obviously playing puts all day. I had two nice "paper" trades on the DIA and SPY down to 8,500, and then again down to 8,250 just before the close. The Dow finished even lower at the close.

It's the usual for tomorrow. I nice wiggle out of the gate and I'm looking to re-load the puts for a move down to the 7,800 - 8,000 area. We'll see what tomorrow brings.....

Note: I was asked to do the Market Cast today, so if you just can't get enough of me, then you can indulge in my latest ramblings in that format today.