Happy Kwanzaa and Boxing Day. The wrapping paper is all that remains of Santa's deeds, the holiday gives way to either contentment or disappointment. The markets are set for action for the final four trading days of the year. Retail sales are weaker than expected for the holidays, on-line sales are no longer a double-digit grower. Watch RTH 43.65, now at 43.82 contributing bullishly to the markets. The broad indexes will noticeably weaken if RTH 43.65 fails. Watch VIX 16.05, UTIL 465.87 and XLF 15.88. Copper is very strong today so if the bulls run copper will likely provide much of the oomph. The S&P futures are up three but tech is not leading the upside so the bulls may not have a lot of gas.
Low volume action is expected today with traders continuing to provide the benefit of the doubt for a positive fiscal cliff resolution. The president and Congress will be back in town tomorrow. Watch the 10-year yield 1.77% level as a pivot point for equity bulls versus bears. Ditto the euro 1.32 level. Here is the opening bell.
Note Added 12/26/12 at 11:22 AM: Copper and commodities are goosed today which created the early market buoyancy. Watch JJC 45.38 and RTH 43.65. Both are contributing bearishly to markets. Both the 20-day MA at 1422.27 and 20-week MA at 1422.02 failed. AAPL is negative. Tech is leading the broad market lower. The VIX is over 19. The 0-year yield is 1.75%, under 1.77% favoring equity bears. The euro is holding up, however, remaining above 1.32 at 1.3240. The SPX is testing the strong 1419 support. Watch the 200 EMA on the 60-minute chart at 1418.88, a critical bull-bear indicator. Markets will become much more negative should 1419 fail. Keystone took profits on the one-day USG short trade exiting the position as the TICK printed -900 a short while ago. Will look to reenter the trade.
Note Added 12/26/12 at 11:30 AM: SPX is testing the critical 1418.88, this is big-time important. Markets will bounce, or die.
Note Added 12/26/12 at 11:42 AM: Perhaps die was the answer as the broad indexes flop around like a fish out of water, the SPX at 1418 punching out a LOD at 1416.43. The 1418.88 is what matters, if price stays under 1418.88, the markets will grow far more negative. Bulls must push the SPX back above 1418.88 asap or they will lose control. Financials, XLF, are holding up today. WTIC oil is 91. Copper and gold higher. Utilities are weak. The euro remains above 1.32 providing the market bulls hope at 1.3218.
Note Added 12/26/12 at 11:56 AM: The bulls recover the 1418.88 level, can they hold it? Bulls breathe a temporary sigh of relief, wiping beads of sweat from the forehead with a handkerchief that is sporting gravy stains from yesterday's feast. SPX 1418.88, RTH 43.65, JJC 45.38 and euro 1.32 dictate market direction today. The TICK prints -1100 at 11:30 AM which identifies today's low.
Note Added 12/26/12 at 1:44 PM: SPX remains under the 20-day and 20-week MA's but above the critical 1418.88. The beat goes on. Keystone is searching for an implement to cut the holiday fruitcake since it has taken on the appearance of concrete. Perhaps the fruitcake can instead serve as a door stop or wheel chock.
Note Added 12/26/12 at 2:19 PM: SPX is now trying to regain the 20-week MA at 1421.90. Copper strength is creating the market strength, JJC now at 45.33, only a hair under the bull-bear line. If the bulls can push the JJC up thru 45.35, 45.38 and higher, the markets will move far higher. For now, markets continue to meander slightly higher from the low -1100 TICK print before lunch time. Keystone bot BBY opening a new long position. This is a very dangerous and speculative trade especially with news that retail sales are weaker than hoped. BBY is setting up with attractive positive divergence on the daily and weekly charts, however, the stock receives incoming tape bombs so it is a wild roller coaster ride fraught with danger.
Note Added 12/26/12 at 3:55 PM: SPX is staggering sideways at 1420. The 10-year is 1.75%. The euro is 1.3226. WTIC oil is 91. VIX is 19.29. JJC is 45.28, bearish. RTH is 43.34, bearish. Keystone added more BBY.
Note Added 12/26/12 at 4:01 PM: The SPX closes above the critical 1418.88, cheating the devil once again. The snowstorm is moving thru the Pennsylvania hills all day long, time to start digging out.
I don't feel an overwhelming need to play these markets. Apart from volatility spreads and a few long term trades, there's simply too much risk in the short-term. No one can say with a comfortable degree of certainty that the "other scenario" won't happen. The bulls can't say that we won't go over the cliff (it looks like will), but the bears can't say that this crazy Congress won't come up with a last minute patch.
ReplyDeleteI decided to jump in today because my 1 day bullish scenario of scheduled budget talks did not happen. Even if they pass a last minute patch it will not be a grand bargain/solution and markets will sell off anyway.
DeleteSounds like a smart approach.
ReplyDeleteThere is an ole Wall Street adage, 'when in doubt, stay out'.
Sure looks like the futures want to get back to test 1391 just as you predicted last week. I don't want to step in front of a bus here, but perhaps a long or two as we approach the 50-day in the cash index? (In its never-ending task to hurt the most traders at once, could it crash today when no one's really around?)
ReplyDeleteThe 200 EMA on the 60-minute chart at 1418.88 is uber importante and a fight may occur here for much of the day. If price moves lower from 1418.88, short will be the place to be, if the SPX regains 1418.88 and moves higher, then the bulls have some further upside up their sleeves. 1418.88. Price is fighting htis level as this message is typed.
ReplyDeleteKS, thanks for bringing the 200 EMA to our attention. Seems like the santa rally is bringing coal for the bulls... Not good, not good at all, 'cause if there is one week that is bullish, it's this week...
ReplyDeleteIf you were timing the market, would you view the SPY or QQQ as the more critical index? I view the SMA 20 crossing below the SMA 50 as an assured in progress or pending market reversal.
ReplyDeleteRich, that question is impossible to answer since there are many things to consider such as risk tolerance, capital available, style of trading you prefer, time that you can devote to markets, etc..., so only you can make all those decisions, but, simply on the surface, a more critical index as far as leading markets would be tech, and small caps, especially tech, since tech led the markets all year long, so the Q's. But you never want to use one tool, you need to consider a dozen tools and then form an opinion. The 20/50-day cross is a very useful cross to use but by nature of using that cross, that says that you are more focused on a weekly and monthly time frame of trading, thus, timing is not as much of an issue when looking at movement over many weeks. For day trading, tools such as the TRIN, TICK and others are useful, but they are not as important for intermediate term and longer term trades.
ReplyDeleteFor a very near term read on the markets which should aid timing, the SPX 30-minute chart with 8 and 34 MA cross, and 60-minute chart with 200 EMA cross are extremely useful to provide the current of the markets. And keep an eye on COMPQ (tech) and RUT (small caps), QQQ and IWM.
Thank you! Rich
Delete