If you remember a while back, say the first week of December, I was wishing that the SPX would just reach up and touch 1120 and be done with it? If you recall, 1120 is the 50% fib ( closing ) from the October 07 highs to the March 09 lows. Well today’s high on the SPX 1120.27. Previously it was 1119, which was close enough, but not as good as 1120. So basically we are re-testing our highs, but we are re-testing them on a pittance of v. Other than a huge spike on 3f, v has decreased for 5 days in a row, which is obviously to be expected. In fact, I imagine it will go down for tow more days, unless we have some panic selling.
Now, I imagine that this resistance should be strong resistance, and originally I felt that we would drop hard off of it. I will be expecting, if we have continued low v, that we put in a reversal candle or two for the rest of the week. I will be looking for hammers, hanging men, dojis, something along that line on the SPX. The NAS is a completely different story. Let’s look at some charts:
Check out the tail on that candle. Now is it just me or is that a pretty significant candle? Yes we broke out to new lows, but they certainly did not hold. I know I have some puts on EXC right now and it has been down 3 days in a row and I have not made a dime. I likely won’t unless this thing moves up.
The old leader has now become the follower, lagging behind the other indices. You can see it hitting the bottom of the broken up trend line, but that don’t mean much since it can follow that thing clear up into the stratosphere.
Here is the SPX and you can see this is the first time that the fib has been truly hit. What I would expect from here, if v was normal a quick retreat. But with low v I expect some hanging man / doji style candles, perhaps even a move above it. I don’t think we see a close above it, but maybe a wick or two. Then next week, I will be looking for some selling, followed by some buying into the new year.
The NAS has been blowing the roof off any prior resistance, much to my surprise. I have my studies off on this chart for clarity of picture, but if they were on you would see that we are still clearly over bought and outside the top bb, both caution signals. But yet it rises. Looking at the components, I expected to see AAPL, MSFT , RIMM etc. leading, but instead it was stuff like HOLX, FLIR, BBBY, FLEX leading and leading strong.
Which makes sense as to why the RUT has taken off like a rocket. Once this was by far the weakest looking indice, now it is re-testing its recent highs. However, once again we have a v issue, and without some v follow through I will continue to be skeptical of any breakouts, not up movement, but breakouts.
The dollar carry trade bubble is a bust. The UUP has shown incredible strength and yet the mkt. rallies. V here is actually increasing into the up move, a sign of strength. We are in a clear breakout zone, a close above 23.16 and the potential for much more up movement is greatly increased. If you had told me the UUP would be at $23 and the NAS would break out to new highs at the same time, I would’ve called you crazy, and you would’ve been crazy, crazy like a fox. I would’ve loved to buy some calls here, but I missed my entry point which was on 12/16. After the gap up, I had to wait for another move down, cuz that’s the way I trade.
Here is a cliff walker on the XOM. I apologize for not having the v on here, but if it was you would see a trend down for five days into this sideways move. I am very tempted to short this thing by Thursday with a stop at a close above 69.60.
RAIL took out the 200 ma and had a baby rally today. It may present a good short opp. within a couple of trading days.
I thought this was forming a bear wedge today, instead we have a bullish engulfing candle on support with decent v. Now I like this for a bounce.
In closing: Still, low v = up and probably now some sideways movement, with intra-day volatility. I will probably enter some short positions either Wed. near the close or Thur. morning depending on news and how the charts are setting up. Trade well and prosper. AKOT
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