Market commentary for 12/08/2008
Good day!
How much bad news can the market absorb? Not sure I know the answer to that question but if the adage the market discounts news 6 to 12 months out, we be might just be at the bottom. Want bad news, here goes, the ISM fell to 36.2% the lowest since 1982, Monday also had testimony form Paulsen and Bernanke, both were not optimistic. Then the official call by the NBER that the country has been in a recession since last December. Auto sales came in minus 41.2%, MRK, RIMM, DD all issued earnings warning and AT&T is laying off 12,000 workers. The worse news of the week was the 533K job loss in November. The three stooges from Detroit testified and the beat goes on. The bright spot is the market rebounded and only finished off 2% for the week.
Now that I told you there is no fundamental basis for the market movement now let me show you the technical side of the market. It was very tricky week to say the least. One reason is look on the 60 min charts. We have a very large range with sharp moves from high to low. Friday was especially very tricky. After gap down the indices tested the Monday low again and when it looked like the 120 min head and shoulder will go we saw a very strong bounce right into the Monday high. Interesting thing to look at is after Monday's high and low the rest of the week we had action between those two areas and at the close Friday Monday's high was broken. The intraday pace was so strong that many daily phoenix alarms sounded however I left them for next week because it was to risky to me to take a trade after such a strong intraday move.
On the daily chart I draw scenario that I expect next week and that is a scenario that was opened after the weekly CCI setup. We can look at it like a reversal head and shoulder and we can look at it like a phoenix. Both are correct and it is more important than a reversal pattern. Depends on the breakup pace and volume we can determine target, but for now I will use equal move and previous high resistance area. Before that the indices need to deal with the 50sma (green line). When I look at the weekly chart I see support for that daily action, but remember that could be tricky move again with many intraday fakes. To avoid that it is important to use bigger stops and proper risk. We are still in a bear market. Right now is good that all the bad news that we hear every day didn’t bring the market down and that is a sign that support area could actually hold. I will look for move up and for swing trades, but again remember that we are still in a bear market and pull backs will be quick and with a strong pace.
Good day!
How much bad news can the market absorb? Not sure I know the answer to that question but if the adage the market discounts news 6 to 12 months out, we be might just be at the bottom. Want bad news, here goes, the ISM fell to 36.2% the lowest since 1982, Monday also had testimony form Paulsen and Bernanke, both were not optimistic. Then the official call by the NBER that the country has been in a recession since last December. Auto sales came in minus 41.2%, MRK, RIMM, DD all issued earnings warning and AT&T is laying off 12,000 workers. The worse news of the week was the 533K job loss in November. The three stooges from Detroit testified and the beat goes on. The bright spot is the market rebounded and only finished off 2% for the week.
Now that I told you there is no fundamental basis for the market movement now let me show you the technical side of the market. It was very tricky week to say the least. One reason is look on the 60 min charts. We have a very large range with sharp moves from high to low. Friday was especially very tricky. After gap down the indices tested the Monday low again and when it looked like the 120 min head and shoulder will go we saw a very strong bounce right into the Monday high. Interesting thing to look at is after Monday's high and low the rest of the week we had action between those two areas and at the close Friday Monday's high was broken. The intraday pace was so strong that many daily phoenix alarms sounded however I left them for next week because it was to risky to me to take a trade after such a strong intraday move.
On the daily chart I draw scenario that I expect next week and that is a scenario that was opened after the weekly CCI setup. We can look at it like a reversal head and shoulder and we can look at it like a phoenix. Both are correct and it is more important than a reversal pattern. Depends on the breakup pace and volume we can determine target, but for now I will use equal move and previous high resistance area. Before that the indices need to deal with the 50sma (green line). When I look at the weekly chart I see support for that daily action, but remember that could be tricky move again with many intraday fakes. To avoid that it is important to use bigger stops and proper risk. We are still in a bear market. Right now is good that all the bad news that we hear every day didn’t bring the market down and that is a sign that support area could actually hold. I will look for move up and for swing trades, but again remember that we are still in a bear market and pull backs will be quick and with a strong pace.
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