Tuesday, January 6, 2009

End of Day 1/6

Well, as I stated in my last update, the volume didn’t support that last run up and it was taken back. The 927 area in the S&P, however, provided strong support all day and did not give up the fight.

For the day, the DOW gained 62 points (.7%), the S&P gained .8%, the NDX gained almost 1%, and the RUT was the strongest, gaining 1.9%.

I note that the DOW managed to close above 9,000 (9,015), but I also note that the futures (/YM) did not and that there is a pretty large difference between the two, about 50 points – with the /YM closing at 8,967. Volume on today’s advance wound up being lighter than on yesterday’s decline as you can see in the one month DOW chart below. Both the DIA and SPY produced higher volume spinners, so volume was heavier elsewhere. Also note the very oversold stochastic and the already rolling over RSI:

Internally advancers outnumbered declining issues by nearly 4 to 1 on the NYSE and about 3 to 1 on the NDX. I also note that this is the first time in a LONG time that we have new 52 week highs (9 issues) exceeding new 52 week lows (6 issues) on the NYSE.

I still think this is a dangerous market to be playing in. The market obviously wants to run higher but that darn reality keeps getting in the way, as do the short term technicals. The indices have run up into their upper Bollingers and are now slowly tilting them up, opening the gap.

Today’s move higher may not have satisfied the small movement on the McClelland Oscillator’s call for a large price movement. If anything today’s action was more spring winding. Now I don’t like any of the short term counts I was using and again think this market is just waiting for a triggering event to come along. It’s true, like Mish points out, that bearish turns often happen on GOOD news and thus the market may remain in fantasy land until Obama’s inauguration or until his stimulus plans are approved.

IYR managed to mount an advance today, finishing up 5.5%, and that drove SRS to less than the $50 mark. I think it’s getting very close to time to start adding SRS, especially if it makes it down in the mid to lower $40 range which it may (I have not added it yet).

That’s about all I have to say, other than I do see a new and small potential inverse H&S on the DOW. The chart below shows this with a neckline at about 9,075. The other indices do not have this clean of a pattern, it’s obviously some type of a flat. At any rate, if this breaks higher the upside target would be about 9,250ish. Since I don’t see this on the other indices, I discount it pretty severely.

If you’re a bull, that RSI divergence should bother you. And here’s another chart that should bother you… the XLF threw a spinner at the 50 day average and failed, AGAIN. Now the stochs are just about overbought here too. Note that the volume has been steadily coming up, but that it’s very low still overall:

Oh, here’s how HOG finished on the daily candlestick… another doji above the upper Bollinger. Too bad it didn’t close at $20, that would have been a clean potential reversal hammer. That HOG is overbought, and today’s volume is slightly less... we’ll see, maybe big pigs can fly? I’ll probably stop out a little over $20 if it wants to run, that’s one of the dangers of taking a poke at a play prior to the trend line breaking - it will break eventually, that’s for certain.

Have a great evening,