Thursday, December 18, 2008

Morning Update 12/18

Good Morning,

It’s another white and snowy one here in the great Northwet… beautiful, actually, unless you have to slog your way to work.

This morning the weekly unemployment filings for last week came in less than the week prior by 21,000, but still at a very elevated 554,000 new claims level.

Later this morning we get the leading economic indicators and the Philadelphia Fed Survey at 10:00 eastern.

Rumors are that Chrysler’s 30 day manufacturing shutdown may be extended and more rumors were floating around that Chrysler would merge with GM. This morning GM denied that rumor.

DOW futures are higher by about 50 points with a little more than a half hour to the open. The dollar is slightly lower, but climbing up off its lows, bonds have moved down in yield/up in price but still within the range of yesterday.

Speaking of yesterday, the action produced a small movement on the McClelland Oscillator which tells us there is likely a large price movement coming in stocks either today or tomorrow. It does not, however, tell us direction.

With the VIX now well below its channel, the signals are still saying to me that the direction is likely to be up. The world is still living in a fantasy where the government can print unlimited money with no consequences. That fantasy will eventually turn into a nightmare. That’s what happens when children run the economy.

Below is a daily chart of the VIX. Note the clean breakdown beneath the triangle. That move could easily pick up steam now and head down sharply. That would bring the price of options down considerably and would set up a good opportunity coming into the end of the month.

The next chart is the SPX. Note that the daily stochastic produced a new buy signal as I mentioned yesterday, but that it doesn’t have too far to go before it reaches over bought. I still see pretty strong resistance in the 940 area.

I note that the 30 & 60 minute stochastic has room to go on the downside, but that the 10 minute is oversold. That says to me a little higher, then a little lower.

DOW futures are now up 25 points, the SPX is up 6. I note that the dollar is climbing pretty good just prior to the open, that warrants keeping an eye on.

Have a great day,