Before the Open (Dec 1)

Posted on by Jason Leavitt

Good morning. Happy Thursday.
The Asian/Pacific markets closed with solid across-the-board gains. Hong Kong rallied more than 5%, South Korea and Taiwan more than 3% and Australia, China, India and Singapore more than 2%. Europe is currently mixed; there are no 1% movers. Futures here in the States are flat.

Thanks to yesterday, the single biggest up day we’ve had in a long time, the Dow and Russell finished November with a gain, and the S&P only dropped 6 points for the month. Not bad considering October was one of the best months in decades.
We entered this week with the indexes in no-man’s land. It was too late to go short and not wise to try to pick a bottom. My plan was to short a bounce or wait for a total washout.
We’ve gotten a bounce, but the bounce has not been a lazy grind up on light volume. Instead we’ve gotten two big up days and massive volume yesterday – this hardly would be considered a dead-cat bounce. It’s all been news-induced, and since news has the ability to trump everything, blindly shorting this move would not be smart. Based on the news, things are different now than they were just a couple days ago. We must re-evaluate and decide if shorting a bounce is still a good idea.
My initial reaction to that question is: no. The market dropped in mid November because the financial troubles in Italy, Spain and other places were growing. But if the coordinated effort by the six central banks I mentioned yesterday gives financially unstable countries a place to go to raise money, there is little fear they’ll miss a debt payment soon. This news alone could prop the market up. It doesn’t solve the problem. In fact it just buys them a little time. But what the heck, if kicking the can down the road means the market will rally for a few more months, let’s go with it and make money.
The home builders are doing well. Several have broken out from tradeable patterns. I expect other patterns to emerge in the next few days. More after the open.
headlines at Yahoo Finance
today’s upgrades/downgrades
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Dec 1)”

  3. IMO, Jason makes valid points here. To my thinking, today is an important day that may provide a valuable clue as to whether this rally will continue in the near term or could be over at SPX 1250 +/-.
    For what it’s worth, here’s what I see. Trendline resistance at the 1250 area, daily MACD (12,26,9) at a bullish crossover level, EW indicating minor 3 waves up complete/completing (either 3 waves of potential bullish 5 waves or 3 wave “abc” completed). If, when & how we pull back today will say a lot, IMO. As Jason pointed out, this rally has had good volume & upside momentum so far. I’ll be watching to see if SPX can find support on any pullback beginning at SPX 1235ish as well as the wave structure of any decline.

  5. PeteM: I see you got your thinking cap on today and I’ve also noticed that you’ve
    been making some pretty good moves lately. Keep that mo-jo workin my brother.
    Your friend Chuck Plosser will be on the airwaves tomorrow morning. HW

    1. Howard – Chuck & I haven’t spoken in months, but I may invite him to meet for a Philly cheeseteak lunch and see if he’ll give me a hint about a possible QE 3!

  7. RichE – I’ve covered both short positions at 1241 and, since you were interested yesterday in my EW analysis, this happended to be one of those trades where EW, Fibo and trendlines combined in textbook fashion so I’d be pleased to go over the trades with you (or anyone else) if you’re interested.
    I’ll be looking to enter on the short side again.

  9. a day or 2 of consolidation would be normal ,regardless of direction
    regards Jasons comments about selling the bounce–no its not a dead cat but im not convinced that the instos have gone into acculmulation from a distribution pattern
    –my tick chart is telling me that there is more selling on the down tick than up
    with negative tick exstrems and no possitive–that can change
    the dax and ftse closed below y/days close
    im in a wait and sleep mode
    ———–does liquidity solve a debt problem—bankrupt the pigs and the central banks–or are they already

  10. AussieJS – your comments are well taken. I’m short again at SPX 1245 on the failure (so far) to get above 1245-1247 figuring (as you do) that, regardless of the short term trend a pullback/consolidation is in order. EW analysis etc. supports that, IMO.

  12. Well, SPX didn’t fail below 1245 so I covered my early 1245 short position at breakeven and now I’m just watching to see is 1249-1250 holds this rally.

  13. Just to clarify my last post. What I meant to say was that I covered my previous SPX 1247 short at 1245. I still have an open short position at 1251. This market is holding up better than I thought it would so I’ll cover this last position at breakeven or lower if SPX can’t get below 1245. On hindsight, I should have covered 1 or both positions at 1240 area which was a .618 retrace of the move up from the 1232-1233 area.

  14. The EW picture has become cloudy since late this AM, telling me we’re in some corrective pattern so I’ve covered my 1251 short at 1247 I’ll and see if things get cleared up a bit – at least as I see it.

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