Monday, January 12, 2009

Morning Update - 1/12

Good Morning,

Futures are lower this morning, with the DOW down about 70 and the S&P down about 6.

No economic reports this morning, tomorrow we get trade data, Redbook, and the Treasury budget. Later in the week we get inflation data, retail sales, business inventories, and consumer sentiment.

We remain oversold on all the short term indicators and the overnight action nearly reached the SPX flag target around 877. I’m not sure of the odds of a gap fill this morning, it’s certainly possible but the market feels pretty heavy to me and it looks like it could be building another potential bear flag.

Let’s take a quick look at the 60 minute SPX chart. Here you can see that the inverted H&S is still there, and we’re STILL within the same old blue triangle boundaries, the lower line being the “magnet” that has now risen to about 869. Note the oversold stochastic:

Next, let’s look at a 10 minute SPX chart. Here you can see a series of bear flags, we are now in the 880 range and may be building another (possible wave 4?). Importantly, that puts the SPX BENEATH the 50 day moving average AND beneath the 61.8% retrace. The 78.6% is at 875. Again, note the oversold stochastic:

Lastly I want to look at a 6 month daily chart of HOG. Harley has fallen this morning all the way to $13.70 but bounced a little and is just above $14. That’s one heck of a move in just 4 trading days, a 30% haircut, and we got every bit of it. That’s a broken chart, so I’m going to hang onto the remaining third of my position, just to see what happens. That’s pushing it a little as we are already now beneath the daily Bollinger, but note that the slow stochastic has room to run on the downside, it MAY push the stochastic down:

Remember, it’s still very possible that we have another leg up coming. Until we break this trading range, it’s really difficult to say. Certainly the unemployment situation is going to weigh on earnings, and speaking of which, earnings season really kicks off today with Alcoa reporting at 4:00 PM Eastern – they were just downgraded by an analyst this morning. We also get to learn how the Christmas shopping season really went, a lot of retailers are warning already, so expectations are already pretty low.

That’s about it for this morning, I’m writing what I think is going to be a good piece on the bond market and should have it out later today.

Good luck with your trades,