Monday, December 1, 2008

Morning Update 12/1

Good Morning,

I hope everyone had a great Thanksgiving and was able to enjoy the weekend. My sympathy goes out for those affected by the violence in India.

DOW futures are down about 200 points this morning.


Of course there’s no change regarding the big picture that is the math I laid out in Death by Numbers.

This morning the manufacturing ISM and Construction Spending report will be out at 10:00 Eastern.

Weakness across much of the world, especially in Asia and Europe continued to fuel concern over the weekend.


Last week saw 5 straight up days that spanned nearly 1,350 points on the DOW. That was a giant rally based upon HOPE and short covering. The key technical for me is that the VOLUME was falling dramatically over the entire week. That decreasing volume is to be expected for Thanksgiving week, so the validity is less certain, but the pattern of rising price = lower volume is still very much in play as it has been through the entire bear market so far.

This morning I also note that a small triangle has formed on both the /YM (DOW) and /ES (S&P) futures. That triangle just broke down and the minimum target on the downside would be 863, and what it looks like to me is that it could run down to about the 855 area which is going to be pretty solid support. This does not look like something that is likely to gap fill immediately to me but that is always a possibility.

Also, the TNX continues to gap down and has put 10 year rates at record lows. The IRX continues to be effectively ZERO indicating that the credit markets are still locked tight.

I am going to be careful trading here as I see the potential for a technical correction here, especially with all my short term indicators over bought, but we need to break that 850 area before I get aggressively short and will probably NOT be today. I also see the medium term bullish/sideways scenario and am watching a potential inverted H&S pattern.

Just prior to the open, DOW futures are DOWN 220 points.

Have a great day,