Archive for November, 2008

Sunday, November 30th, 2008

The Christmas Shopping Press is on!  It totally amazes us why anyone would fight the crowds at the mall when all that needs to be done is just a point and click away.  Pointing and clicking has another advantage, price comparisons and less emotional purchases.  This, of course, is not the preferred shopping venue for merchants who would like nothing better than, to entice you into buying stuff that you don’t need or hadn’t thought that you might want. 

As to the stock market….hate to be a told you so…but we told you to expect a 10 to 20% rally, which you got, this is a quote from last week’s Option Queen Letter: “Although we continue to sound extremely bearish we do believe that there will be a very tradable bounce which should add 10 to 20% to the averages.” Okay now comes the test.  We need to examine the behavior of the market on the retreat, which we will see beginning this week.  We need also to watch the volume on that retreat.  If the retreat is narrow, shallow and has light volume, that would be excellent for the bulls, however; should the rally become a sell-a-thon with high volume, look for a test of the recent lows.  We will not know which it is until it begins. 

It is interesting to note, that the Russell 2000’s recent rally played catch-up to the rest of the market taking that average up a full 20% on the week!  Perhaps the January bargain hunting is starting now in December.   We actually would challenge the 490 high seen in at the 13:00 hour in the Friday session but apparently they were good trades.  We went back to the tape and there they were about 53 lots that traded 490.00 at 13:00 and a few seconds.   At 13:00 hour the market was trading at 473.70, at 13:00:02 that market was at 490.00, now that is a rally!  Apparently it was a stop that was hit, we are not entirely sure, but that rally lasted literally two seconds and then quickly retreated! 

Monday:  Fed Chairman Bernanke and Dallas Fed President Fisher speak and October construction spending is released at 10:00.  Tuesday: 
Philadelphia Fed President Plosser speaks.  Wednesday:  Challenger, Gray & Christmas issue the November ‘job cut” numbers, 3rd quarter productivity, November ISM SERVICES INDEX IS RELEASED, Beige-book is released at 2:00, and Richmond Fed President Lacker speaks.  Thursday:  October factory orders are released at 10:00.  Friday:  November nonfarm payrolls and unemployment rate is released at 8:30.  
 

The US Dollar index has more room to travel to the upside.  The uptrend line for the Monday session is at 85.385.  The 5-day moving average is at 85.903.  The top of the Bollinger band is at 88.709 and the lower edge is seen at 84.789.  The indicators that we follow are all pointing higher with plenty of room to the upside.  All this information is not panning out for the weekly chart which is issuing a sell-signal.  All the indicators that we follow are uniformly issuing a sell-signal for this time-frame.  We are above the Ichimuko clouds for the daily and the weekly charts.   We are moving into the clouds on for the monthly time-frame.  The monthly chart is overbought and is about to issue a sell-signal.  The dollar’s rally has been remarkable.  It is imperative for the US Dollar index to remain above 84.65 on a closing basis or open the door to a return to the uptrend line at 82.639.   

The S&P 500 has enjoyed a 5-day rally taking the index above the downtrend line.  The indicators that we follow continue to point to higher levels; although; they are momentum is slowing down a bit.  The 5-day moving average is at 874.40.  The top of the Bollinger band is at 1007.08 and the lower edge is seen at 766.07.  It is possible that this index will rally further in the Monday session as 401K money is put to work then, the truth will emerge and we shall see how far and how intense the retreat will be.  We expect to see this market retreat as early as late in the Monday session.  We remain below the Ichimuko clouds for all time-frames.   If this rally is to hold, we need to stay above 799.35.  A retreat to 857.50 is very likely and a retreat to 836.64 probable, even 818 is possible.    

The NASDAQ 100 declined in the Friday session.  The good news is that this index did make a higher high and a higher low on the day.  The 5-dya moving average is at 1171.45.  The top of the Bollinger band is at 1380.28 and the lower edge is seen at 1033.05.  We remain below the Ichimuko clouds for the monthly, weekly and daily time-frames.  The RSI has curled over and is low pointing lower.  The stochastic indicator continues to plow higher at overbought levels.  Our own indicator is curling over and could, with in a day or so, issue a sell-signal.  The Thomas DeMark Expert indicators is overbought and pointing higher.  We believe that this index will retreat in the coming week. 

The Russell 2000 strange behavior was just that strange.  One moment the index was trading at 471 and the next 490 only to retreat to 468 before the fair-value settlement at the close returning the index to 472.70.  Did somebody press the wrong button at 1:00 EST or was it a momentary feeding frenzy?  We certainly are not sure.  The Market Profile chart really shows the weird price action best with lots of single prints above the 473 area.   The 5-day moving average is at 454.82.  The top of the Bollinger band is at 557.74 and the lower edge is seen at 838.27.  We remain below the Ichimuko clouds for the daily and the weekly time-frame.  We might see some further gyrations in this index as people move out of the regular Russell 2000 contract and into the mini Russell 2000 contract.  After the December expiry, there will be no more Russell 2000 regular contract and only the mini will be traded.  The mini only trades electronically unless it is paired with options.   Strange things are happening here; keep awake because when this thing moves, it takes seconds not minutes. 

Crude oil seems to be forming a rounding bottom.  The 5-day moving average is at 53.628.  The top of the Bollinger band is at 70.00 and the lower edge is at 46.436.   All the indicators that we follow herein are issuing a continued buy-signal for the daily chart.  We are below the Ichimuko clouds for the daily and weekly chart and we are in the clouds for the monthly time-frame.  If the market can trade above 55.48, it looks as though we could go to, at the very least 63.16.    

Gold has enjoyed a nice rally but seems to be stalling here.  All the indicators that we follow herein are overbought but none is issuing a sell-signal rather, they all seem to be going sideways without direction.   The 5-day moving average is at 817.74.  The top of the Bollinger band is at 832.32 and the lower edge is seen at 683.80.  We closed the Friday session inside the Ichimuko clouds.  We are below the Ichimuko clouds for the weekly charts and above the Ichimuko clouds on the monthly chart.  The monthly chart shows that we need to close above 907 if, we are going to print a new high.  While the economies around the world slip and slide between recession and almost depression, we feel that the price of gold will remain depressed, however; once the global economies regain firm footing, gold will begin to rally and will begin to trade at new highs.