Before the Open (Dec 22)

Posted on by Jason Leavitt

Good morning. Happy Thursday.
The Asian/Pacific markets closed mixed and with a downward slant. Australia (down 1.2%) was the only 1% mover. Europe is up across the board. Austria is up 2.4%, and Belgium, France, Germany, Amsterdam, Norway, Stockholm and London are up 1% or more. Futures here in the States point towards a gap up open for the cash market.
The dollar is down slightly. Oil and copper are up. Gold and silver are down.
Until two days ago December was looking weak. Now, thanks to the big move up Tuesday and some follow through yesterday, the S&P is close to 1250 and things aren’t looking that badly any more. Many stocks have broken out the last couple days. By itself this is a good sign, but many of those breakouts are safe-haven stocks. The price action looks good, but when ORCL, IBM, CRM and others lag while utility stocks move up, we definitely have to take note. In the end money rules, and when money rotates to groups such as consumer staples, health care and utilities, it’s not a good omen.
Here’s the 60-min S&P chart. The price action is getting squeezed by converging trendlines. Pressure is building. As long as the index trades below the red horizontal line, my longer term bias will be to the downside. For me to believe a move up has legs, I need the top of the triangle taken out with force, and I need the “right” groups to lead the way. More after the open.

headlines at Yahoo Finance
headlines at MarketWatch
today’s upgrades/downgrades
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Dec 22)”

  1. do we get a triangle breakout at 1250ish to Petes 1300 lower double top or a lower double top at the 1266 ish
    either is pos or a sideways into year end
    europe is sick and just holding in there
    usa has had one hindenberg reading on tues and we need another for confirmation
    internals and sectors are not good
    my new years party outfit is one of a hidiouse frightening bear

    1. AussieJS – you hit it on the nose, IMO. The triangle trendline comes down just above the 200 day SMA (1259ish. I can’t help but to expect it will be a magnet for what, so far, is an EW 3 wave advance from MON’s low. If 1242ish is broken on the downside from current resistance, it will tell me that this rally is an “a” wave (of an anticipated 3 larger wave abc advance) and not a potential 5 wave advance. That’s still bullish short term but the target lowers to a test of 1292-1300, IMO.
      SO FAR, this advance from yesterday’s low lacks the upside momentum of the intial rally from MON’s low to 1242ish, so it’s suspect, IMO, as a 3rd wave of a potential 5 wave bullish advance. But, this rally from yesterday’s low is still in progress unless and until 1242 is broken during any pullback today.
      The most bearish thing would be that this 3 wave rally is all there is, completing a corrective “abc” advance from 1202, and the downtrend resumes. All things considered, I’m inclined to short a reversal intraday looking for a test of 1242.

  5. Well, I’m short SPX at 1249 with one foot already out the door.
    Howard, the triangle is so obvious that I agree that it would be a great bull trap and something to watch for if/when it occurs.

  6. (#2) My perspective of Jason’s triangle ties in with the Christmas rally
    and then the so called, ‘January effect’ where I see a double top at 1290
    and then kiss it goodbye. That’s why I call it a bull trap because just
    as soon as everybody thinks that the market is breaking out to the
    upside it starts to tank. ++special instructions for AussieJS: please
    read this memo twice as you are far, far away from what it is I am
    trying to say here. 🙂

    1. Howard – since we’re spculating, your 1290 double top coincides with my less bullish 3 wave rally theory from 1202 with a target of 1292-1300. It would be even more of trap to exceed 1290-1292 intraday on a triangle breakout and then reverse, don’t you think?

  8. My last Fibo resistance area before the 200 day SMA (1259) would be the SPX 1256 area. So, one more new intra day high above 1254ish, followed by a downward reversal, and I’ll make one more attempt to short in what may the completion of the 3rd wave up from the 1202ish MON low.

  9. the bad bonus insto rally may be happy for a years end here,but the computers have already been programed and the market is so slow that there may even be a computer slow down strike

    1. Your price quotes on on the S&P. So, are you shorting SPY? Or, are you just using the S&P prices and shorting the futures contract? And, is a net 6 pt move worth the risk? Seems to be just a day trade. Do you look for larger moves?

  14. My frustration for today ends with my third short position covvered at breakeven. My only consolation is that I didn’t get killed being wrong. I’ll end by making a few observations in hopes it can help other traders.
    My EW analysis didn’t fail me this week. I just got caught up trading in the wrong time frame and lost sight of the larger picture. Everything, from an EW standpoint, pointed to an important low on MON, but I failed to get long for fear of getting caught long on a downside opening gap on TUE. I can’t beat myself up over that. Yesterday was another story. Again, EW pointed to the SPX 1230ish area as a potential bottoming area but I got fixated on the 1225 area (Chris stepped in and bought at 1231 if I recall right). I blew that! Today was just too hard to analyze but I wore myself out trying anyway. I think I did that because of my frustration in missing this entire rally so far from 1202. The moral of the story is that whatever your trading technique, you have to remain objective and not let emotions take over. Congrats to Chris & I hope he’s still long as I should have been.

Leave a Reply