Wednesday, January 7, 2009

Morning Update 12/7

Good Morning,

Futures are down significantly this morning, the DOW is off about 100 points, but the S&P is down even more on a percentage basis. That RSI divergence I showed yesterday was prescient and it was not a small divergence either.

The media is blaming more layoff announcements yesterday which was followed by a very bad employment outlook by ADP (a prior and future short target). Meredith Whitney over at Oppenheimer also had a few choice words about banks needing to raise still more capital, and then there’s Intel missing forecast on revenue and Time Warner taking write downs. Not a great fundamental picture, is it? It’s only going to get worse and we’re just getting to another earnings season.

So, today’s action indeed makes yesterday’s move look like a failed 5th attempt higher and this may be the start of wave ‘b’ down of wave ‘c’ up, of the larger wave ‘B’ up/sideways. That does leave at least one more wave up coming, so I think getting bet the farm short on this move would be a mistake, however, it is possible that count is not correct and we just head on down, but that’s not my most likely scenario now. In fact, the 900 to 905 area should offer strong support here. If we break that, then it could be something more.

Keep an eye on the short term stochastic, the 30 minute fast is already approaching oversold, and the 60 minute is already half way there.

I note that HOG has broken its uptrend line, and is down 10% from its high of $20 which is where I added to my short position. I’ll be watching that play and will let you know when I exit.

GLD is down a little after a big comeback yesterday.

Good luck to your trades and have a good day,

Nate