Monday, December 22, 2008

End of Day 12/22

For the day, the DOW lost 59 points (after being down more than 200), the S&P lost 1.8%, the NDX was down 2.3%, and the RUT also gave back 2.3%.

GM and Ford debt was downgraded which sent GM stock down 22% on the day and Ford down 12.2%. Several of the key financials were put on ratings watch over the weekend, and that, too, put pressure on the financials.

The volume was lower across the board, and I do note that the past 4 sessions of decline have come on progressively weaker volume.

Overall we are still stuck in the same old range, but several indices did break their recent uptrend lines. Let’s start by taking a look at the 20 day 30 minute chart of the SPX… note that once again we arrive at and bounced off the old dark blue triangle bottom in the 860 area. We have been in this exact same area for nearly 3 months – that’s the line that keeps acting like a magnet for prices. Also note that we are following the twin red lines (inverted H&S neckline) downward. On the shorter timeframes there’s also a potential H&S pattern that is not confirmed as the neckline has not been broken. While were here, also note that the 30 minute stochastic is coming up out of oversold after just producing a buy signal on the late minute climb. The 60 minute stochastic is still oversold, and the 10 minute fast is climbing rapidly, but the slow is just leaving oversold. This argues for some advance in prices, probably tomorrow.

Next, let’s look at a 3 month daily of the XLF (financials). Note that we have a clean break of the latest uptrend line and possibly triangle. Also note the declining volume. That is a mixed picture, I would feel a lot more confident about future declines if the volume was confirming here. Note, too the sell signal is still in force on the stochastic with lots of room for further declines.

This next chart is a 3 month daily of the NDX, it has the same chart pattern as the XLF. It also has a fresh sell signal on the stochastic and it also failed to breach the 50 day moving average.

Now let’s look at a 3 month daily of the SPX. You can see how the candlestick was turned into a near hammer by the late day rally. You can also more clearly see the 860 area is the bottom of the old triangle.

Lastly is a quick glance at a 1 month daily of the DOW. That’s also a near hammer that would portend higher prices ahead. I say “near” because of the pip on the top. It still could be a reversal signal and would need confirmation tomorrow. Since I don’t see the same thing on the other indices as strongly, it’s in question. Here you can clearly see the lower volume as we get closer to the holidays. Again the daily sell signal on the stochastic leaves room for more decline, but we are getting close to the bottom Bollinger band.

Elliott Wave count wise, it’s difficult to tell exactly where we are. My best estimate is that we are in wave ‘b’ down of the larger wave ‘B’ up/sideways. If that’s true, we should not break the previous low at about 7,500 on the DOW, and we should go on to likely make a new high for this trading range. That count is not a lock, that’s why I’m still playing small. I will repeat this; so far this “Santa” rally has been nothing but weak, weak, and more weak. The 920 S&P level has been impenetrable so far.

TLT went down a little today and I exited half my position as it hasn’t made the sharp reversal I was looking for as of yet. Another leg higher is still possible.

The VIX closed down a little today, I note that once again it is declining at the same time the market is – that is certainly not the norm, but does show that volatility is decreasing from previous stratospheric levels.

A lot of economic data comes out in the morning. With light volume it should be interesting. Again, short term stochastic says advance is possible tomorrow.

Have a good evening,