Monday, December 29, 2008

End of Day 12/29

Yet another low volume, time wasting trading session!

For the day, the DOW finished off 31 whole points, the S&P gave up a miserly .4%, the NDX was more giving with a minus 1% performance, and the RUT was the most generous, giving up a full 2.2% on the day.

And that just about sums it up. Technology and small caps stumble while the larger caps hang onto their support areas. I don’t see too much convincing either way, the internals look the same with the NDX and small caps leaning more negatively than their larger brethren.

Below is a one month daily of the DOW. Today’s down, then up, action produced a hammer on higher volume than the past two sessions, but still pretty weak overall. You can see that the fast stochastic has turned up already from the bottom, but the slow is still pointed down with room to run.

Here’s a 20 day, 20 minute chart of the SPX. Again, basically sideways action and we can’t get too far away from the 865 level before we return. We broke the double green line Head & Shoulders, then came back above. On the NDX we came right back to its neckline. The stochastic is crossed, with the fast approaching overbought, and the slow just coming out of oversold. On the 10 minute, both the fast and slow have moved back to overbought. The bottom line is that all I see is sideways movement here that’s eating up time and is also eating up accounts of people who try to trade it. The inverted H&S is looking more and more out of proportion time wise.

REITS got hit pretty hard today, the previous article about retail sales and coming bankruptcies has a lot to do with that. Below is a 3 month daily chart of IYR (commercial real estate ETF) and you can see that we broke down out of the channel on heavier volume that the prior two days and that we have a sell signal on the stochastic.

Here is a Point & Figure chart of the REIT index that shows the same breakdown is confirmed:

Below is a two month daily chart of the VIX. Note that it has created what looks like a little channel that could be a wave 4 sideways movement… if so, there should be a wave 5 down here to lower volatility levels, and that contradicts what we’re seeing in the REITS, but would be commensurate with another movement higher in equities.

Earnings will be coming up pretty soon for the 4th quarter, that’s when reality will kick in once again. But that will also be during a “hopeful” period brought about by more hopeless spending and stimulus by our new President and not so new people who surround him. The fundamentals will not have changed, they will only be made worse with more and more stimulus.

I keep reading articles that mention no “modern” President in his right mind would try to balance a budget during a recession! Ha, ha, and all I can think is how out of their minds the people who let this situation come are. The problem is debt saturation. Those trying to press more debt into the system are going to be disappointed. It is our monetary system that is the root of this debt problem – again more on that is coming.

Have a good evening,