Market commentary for 12/15/2008
Good day!
Another week of bad news on the economic front. Just to name a few, the Tribune filed chapter 11, 3M, FDX, TXN, KR and ERTS issued earnings warnings, DOW is laying off 11K worker, BAC laying off 35K workers, initial jobless claims were 573K a 26 year high, Madoff got caught in a 50B ponzi scheme, the Senate said no to the big 3, 1 and 3 month t-bills were negative and lets not forget about Rod Blagojevich arrested trying to sell a US Senate seat. Oh by the way the markets finished flat on the week.
After the gap up on Monday the indices started consolidating. On the daily charts we can see they all reached the 50sma on Monday and that is the resistance area and usually it won’t be broken on the first try. Until Thursday afternoon we had very nice bullish consolidation under this resistance which suggested a third buying wave on the daily charts, but with Thursday afternoon's intraday selling pace increased which resulted in a gap down on Friday and back to the 20sma support area. Unfortunately with that action chances for a daily uptrend are smaller right now. On the charts see I will try to explain what we can expect next week. On the 60 min charts we can see the QQQQ holding best for now, it is still in the bull flag channel, which we cant say for the weakest DIA. With Friday's gap down the DIA giving back almost all the gain from the previous support area. After the bounce on the daily charts from lows I was bullish and I expect more strength after months of strong selling. But with last weak action my bullish bias decreases for right now I don’t see many reasons for it. We can see on the charts that little uptrend pace is not very strong, at least it is not stronger than the selling pace into the low, especially for the QQQQ where we can see that it is obviously weaker. That is not good sign for upside. The QQQQ chart this is a bearish signal if the channel breaks down and for the DIA where pace is same it is signal for big range action and odds for rounding lows on the daily/weekly charts. Right now, if buying pace does not increase and show strength (something like bounce from low) the question is only will indices break down right at next week start or we will see little higher high and then break down. If we look at charts first scenario is the DIA chart and second is the SPY. Only a strong pace and heavy volume can change that.
On the weekly charts we can see that indices are still in the selling channel and we have fair odds to see lower low. The past few weeks we had a really nice CCI setup, but the bounce pace is weak and we can see that the 10sma is resistance right now. If you remember my comments and class about moving averages you can remember that after strong move the 10sma is always the first strong resistance/support area. If the indices won’t break increases the odds for a bear flag. The QQQQ flag looks best, while the DIA looks good enough for a double bottom or slightly lower low, which is still a double bottom pattern.
The key to all this will be the pace and volume. If we don’t see a strong move up next week then I believe that odds favor a move down. The indices need to break the 50sma daily and 10sma weekly with strong volume and pace. Right now it is very hard to be a swing trader, because every overnight trade is higher risk. Safest place will be trading intraday moves. For a good move up and breaking weekly flags it will be nice to have support of some good economic news. It looks like market calculated all the bad news and can’t go down after every new piece of news, but right now they are playing with the market over auto industry situation. Right now, that is last big news which can turn it all down. Without a strong move up the first part of the week, my bias for a break down and retesting previous lows will increase.
Good day!
Another week of bad news on the economic front. Just to name a few, the Tribune filed chapter 11, 3M, FDX, TXN, KR and ERTS issued earnings warnings, DOW is laying off 11K worker, BAC laying off 35K workers, initial jobless claims were 573K a 26 year high, Madoff got caught in a 50B ponzi scheme, the Senate said no to the big 3, 1 and 3 month t-bills were negative and lets not forget about Rod Blagojevich arrested trying to sell a US Senate seat. Oh by the way the markets finished flat on the week.
After the gap up on Monday the indices started consolidating. On the daily charts we can see they all reached the 50sma on Monday and that is the resistance area and usually it won’t be broken on the first try. Until Thursday afternoon we had very nice bullish consolidation under this resistance which suggested a third buying wave on the daily charts, but with Thursday afternoon's intraday selling pace increased which resulted in a gap down on Friday and back to the 20sma support area. Unfortunately with that action chances for a daily uptrend are smaller right now. On the charts see I will try to explain what we can expect next week. On the 60 min charts we can see the QQQQ holding best for now, it is still in the bull flag channel, which we cant say for the weakest DIA. With Friday's gap down the DIA giving back almost all the gain from the previous support area. After the bounce on the daily charts from lows I was bullish and I expect more strength after months of strong selling. But with last weak action my bullish bias decreases for right now I don’t see many reasons for it. We can see on the charts that little uptrend pace is not very strong, at least it is not stronger than the selling pace into the low, especially for the QQQQ where we can see that it is obviously weaker. That is not good sign for upside. The QQQQ chart this is a bearish signal if the channel breaks down and for the DIA where pace is same it is signal for big range action and odds for rounding lows on the daily/weekly charts. Right now, if buying pace does not increase and show strength (something like bounce from low) the question is only will indices break down right at next week start or we will see little higher high and then break down. If we look at charts first scenario is the DIA chart and second is the SPY. Only a strong pace and heavy volume can change that.
On the weekly charts we can see that indices are still in the selling channel and we have fair odds to see lower low. The past few weeks we had a really nice CCI setup, but the bounce pace is weak and we can see that the 10sma is resistance right now. If you remember my comments and class about moving averages you can remember that after strong move the 10sma is always the first strong resistance/support area. If the indices won’t break increases the odds for a bear flag. The QQQQ flag looks best, while the DIA looks good enough for a double bottom or slightly lower low, which is still a double bottom pattern.
The key to all this will be the pace and volume. If we don’t see a strong move up next week then I believe that odds favor a move down. The indices need to break the 50sma daily and 10sma weekly with strong volume and pace. Right now it is very hard to be a swing trader, because every overnight trade is higher risk. Safest place will be trading intraday moves. For a good move up and breaking weekly flags it will be nice to have support of some good economic news. It looks like market calculated all the bad news and can’t go down after every new piece of news, but right now they are playing with the market over auto industry situation. Right now, that is last big news which can turn it all down. Without a strong move up the first part of the week, my bias for a break down and retesting previous lows will increase.
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