Monday, December 15, 2008

Update Heading Into the Close… (+ edit)

I have to leave this afternoon, so there will not be an end of day report unless there are significant developments, and if there are it will be later this evening.

The move down today has been pretty tame with little impulse behind it. Again, we have positive seasonality, a buy signal on the weekly and a sell on the daily. Thus the market is behaving in a choppy and non-directional manner.

We’re approaching oversold on the 30 minute stochastic, so there’s a possibility of higher prices soon, although the 60 minute still shows room in both directions.

All the indexes broke down out of their bear flags, but have not reached their respective targets yet. The DOW has been the strongest and the RUT/NDX the weakest.

Note on the 5 minute SPX that we are right back at that old magnet of a blue line, the bottom of the old triangle at 860. We have broken beneath the large bear wedge, light blue line, and have now confirmed with a clean break on the bear flag (green lines). This 860/865 area is strong support and it now looks like it is turning into a small H&S neckline. If so, and it confirms, the target on that would be down in the 840 area. Note, too, the ‘m’ pattern that has formed today with a lower high – that’s bearish.

Interesting tape though, as we are approaching oversold on the stochastic, it doesn’t feel that bearish and has certainly settled down from the extreme volatility we were experiencing. Of course events can change that in a hurry either way.

Here’s a 3 month daily chart of the VIX. Note that it went back up into that ominous triangle. Don’t know, the charts are talking here… that is a huge caution flag. We’ll see though, it has to regain the 50 dma first without falling back outside. Again, a break down of the VIX would be bullish – hasn’t happened so far.

Here’s a chart of the TNX (10 year T-note). Friday it produced what looked like a reversal hammer, but it did not confirm today.

As I’ve been typing the SPX has dropped further and is now beneath 860… looking a little more impulsive here on the downside. The VIX is rising even higher, now up 7.7% on the day so far.

I’ll be taking just a little of my short positions off here this afternoon to let the stochastic work off that oversold on the 30 minute timeframe, but still think it’s likely we reach the bear flag targets.

Have a good afternoon,


EDIT update: picked up some bullish impulsiveness in last half hour. VIX failed to make a new high, but is still inside the triangle. Took small profits on most of short positions, good time to be small!