Friday, December 12, 2008

End of Day/Week 12/12

Well, despite awful fundamental news, the market held tough. This is making the bulls feel more confident that we’ve “reached bottom” and will proceed higher. Whew! I sure am glad the worst is behind us! Ha, ha… the punch line to that joke is that this market is terrific at drawing in fiat money from both sides and returning it to the ether from which it came. Don’t let it destroy yours!

For the day, the DOW finished up 63 points (280 points above this morning’s low), the S&P finished up .7%, the NDX was up 2.2%, and the RUT was the leader on the upside with a strong 3.8% showing.

Volume on the day was mostly flat relative to yesterday. Advancing issues were about 2.5 to 1 over decliners. The short term stochastic is approaching over bought but there’s room for either direction on Monday.

The VIX closed right on the bottom boundary of its triangle. It keeps threatening to break down, but hasn’t. If it does, I will feel a lot more confident about getting some more upside. Until it does, prove it!

One of the potential tape bombs for today was the fact that GGP (General Growth Properties), a very large commercial real estate company, was looking like they were going to miss a debt payment but were able to refinance it at the last second today. That sent REITS up like a rocket, nearly reversing yesterday’s plummet. SRS dropped 19% today to basically undo yesterday’s advance. Ridiculous, CRE is in big trouble in this environment. GGP has gone from being a $65 stock to a buck-eighty – AFTER gaining 25% today.

Here’s a P&F chart of gold. It just broke out higher yesterday and produced a target up around $980. I’m showing it to you, but be careful, the dollar is temporarily weaker and this could reverse at the drop of a pin. I am still cautious about gold, but would recommend adding small positions on weakness, but you must be willing to sit on some potential pain. I use P&F charts to help identify breakouts or breakdowns and they are helpful in developing target areas:

Below is a chart of the SPX daily. Note that today’s candlestick clearly broke the bear wedge, but clawed its way back inside. This candlestick looks very similar to the one on 11/18. Again, note the sell signal on this stochastic timeframe.

The next chart is the DOW weekly. It has a buy signal on the stochastic illustrating the cross currents I’ve been talking about all week. The weekly candlestick is a spinning top that shows indecision. If you look at the right side of this chart, what do you see? Do you see a bull run? I sure don’t, again, what I see is more of a big flat that looks to be buying time before its next move.

It does still appear that we’re in wave B up/sideways for now, but may have a short term bearish slant. It will be interesting to see if that potential bear flag breaks down, or if we head higher.

I have the first Christmas party of the season tonight, I hope everyone has a great weekend and I’ll try to find some interesting posts tomorrow while I work on my next article.