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For the second month in a row, SPX closes down and below its 10 month moving average. This has not happened since November 2001 (with a brief headfake in August 2004, but those were green candles) and could be confirmation that we have started a bear market. It's not set in stone, but certainly a heads up.

Morning update:

Watch that COMP 2646 level. Gap close there is around 2641 if we overlap. This is still low volume tax loss selling.

Open :
We are seeing the last round of tax loss selling as those traders that waited for a rally in their losers finally give up and take the hit. QQQQ is fast approaching that 50.90 gap close.
Oil has dropped due to dollar strength against the euro. I expect a dollar rally against the euro to be the main theme of 2008. It would be bearish for commodities in general.

With equity ISE at 201, any rally at this point could be short-lived. If you are long, stick with techs that have been unfairly punished in 2008. They might have seen the worse. As for the winners of 2007, expect some pretty hefty profit taking.

Morning update (2):

It's pretty much a given that we will close those December 20th gaps, or at least get near. COMP 2640, RUT 768, QQQQ 50.90. Remember that COMP has a key level of support at 2645, 38.2% 2000/2002, which should hold. Take your cues from NQ and the 2100 level. This might not happen until January, but heads up in case they decide to get it over with sooner.

Morning update:

The bounce is weakening and we are seeing selling in the BIX (banking). Trins have moved up above 1 and AD lines are dropping. Again, SPX needs to hold 1482. The light volume is treacherous. If COMP hits 2677 again, we will eventually get down to 2645/2650. That ISE was just too optimistic, although they might fight to hold this one up until year end. Not a good day to trade.

NQ has a gap to close at 2098 should things get really bad.

2007 tech dogs I like for 2008 are TXN and BRCM. We are moving more and more to smart phones and mobile chips will benefit. I particularly like BRCM if it can hold 26.20. It looks like it's ready for an upside breakout, although be aware that it could whipsaw you all over the place and is not for the faint of heart. Conservative traders might want to wait for a close above 27.07. It's a long term play to the 40 area. The same for TXN if it holds the 33.45/33.55 area (gap close and 200 ema).

Open:

They are not quite ready to let this one fall apart. The COMP briefly entered the 12/20 gap (2640/2677), but bounced back this morning to 2697. AD lines are positive, TRINs are low, Nasdaq new year highs 20 and new year lows 6.
NQ (NDX futures) is hovering above its 50 dma, as is ES.
SPX 1482.70 needs to hold going forward.
ISE is still optimistic, although we definitely saw a drop yesterday from the 199 closing reading.

New home sales at 10.

PM udpate:

QQQQ 52 corresponds to NQ 50 dma at 2136.50 which should be support, although the AD lines are getting very negative. COMP lost its 50 dma, bulls need to regain at the close.

Morning update (2):

Oil spikes up and that is just too much pressure. Watch ES 1481, weekly pivot.

Morning update

The July high for the COMP was indeed rather precise resistance for this rally. Support is still the 50 dma at 2692. AAPL and GOOG still have a bid and that could hold us up. Bonds are putting pressure on ES.

Consumer confidence was actually up, but durable goods orders are a drag. Oil inventories at 10:30.

Bulls manage to swing it green and the Nasdaq closes a hair below the July 19th high (2724.74). This could be a challenge tomorrow, with ISE at 199.

Overnight traders watch NQ 2172/2175 area of resistance.

Open:

So far, this looks like a minor consolidation day. The dollar is lower, which could be supportive. Watch SPX 1490 support and COMP 2692. We could get more selling if those levels break, but until then, it's just chop. Your clue will come from bonds.

Pre-open:

NQ closed the December 2131 gap on Friday and it was support overnight. That is normally bullish. Upside target should be 2150, R1 but also 61.8% Oct/Nov on the continuous contract and the old December high.

ISE closes at 139, still plenty of pessimism, i.e upside for stocks next week if the COMP can get past 50 dma resistance at 2695 on a hourly close.

Nasdaq new year highs 169, new year lows 112. BPNDX (Nasdaq bullish percentage index) reversing sharply to the upside.

Dec. 21 (Bloomberg) -- The Federal Reserve will conduct emergency auctions of loans as ``long as necessary'' every two weeks as part of a global attempt by central bankers to restore faith in the money markets.
The Fed and European Central Bank loaned $30 billion in 35- day funds today at an interest rate of 4.67 percent, 2 basis points more than at the initial auctions four days ago. The rates are less than the 4.75 percent banks are charged to borrow directly at the Fed's discount window, suggesting the central bank is making progress in alleviating a credit crunch.

Dec. 21 (Bloomberg) -- Consumer spending in the U.S. rose in November by the most in more than two years as incomes grew and shoppers took advantage of early holiday discounts.
A bigger-than-forecast 1.1 percent increase in purchases followed a revised 0.4 percent gain in October that was more than previously estimated, the Commerce Department said today in Washington. The Federal Reserve's preferred measure of inflation accelerated, the report showed.
More jobs and higher salaries may avert a collapse in spending, which accounts for more than two-thirds of the economy, as home values fall and fuel costs rise. The jump in sales last month reduces the odds the economy will contract this quarter, even as retail surveys suggest shopping has cooled in December, economists said.

The VIX is below 20 once again. This has been market tops in the past few months, let's see if this time around is different.
NQ shows little resistance until 2140 if 2106 holds.

Nasdaq new year highs 71, new year lows 48. Big change from the past seven trading sessions.

RIMM delivers and QQQQ gets past 51 after-hours, a target I mentioned earlier this week based on put/call activity. It just took its sweet time getting there. The COMP will probably get past 2645 tomorrow and the stage is set for a year-end rally, barring some major catastrophy. The economic news is pretty sad out there, but a lot of it has been discounted by now and another Fed cut is probably looming. If we do rally into the new year, I expect more selling and of the heavy type in Q1. For now, don't stand in the way of the bulls if they start running the tape up on the low holiday volume.

PM update:

Some buyers step in, especially with NQ, although this could be more of a short squeeze. The VIX is in a nice downtrend, giving us a bullish divergence for the past two days, maybe that is why we are making higher lows. Obviously, that pattern has to play itself out, but VIX is usually smart money.

It will be very interesting to see if ES shoots up after the close once we are over this 1450 pin.

WASHINGTON (MarketWatch) -- Qualcomm Inc. revised higher its financial forecast for the first quarter Thursday, citing strong shipments of computer chips used to run mobile phones.

Could this be a positive for RIMM after the close? Markets certainly hope so. The problem is that QCOM moved down afte jumping up. This has been the stroy all week, and one wonders if this is just opex or something much more sinister. We will find out tonight and tomorrow.

It is time to start looking at the beaten down stocks that could benefit in January. BRCM is particularly interesting, if it can hold 26.59. It's the chip in the new 3g iphone and once we clear the cobwebs, it might have a very different 2008.

Morning update:

It's that SPX 1450 pin again. We might not be free of that until tonight.

Open:

Nice bid, awaiting leading indicators at 10. Note that ISE is at 127, even on a good day. If anything, this market coulc climb higher with all this pessimism.

NQ support is at 2072, 2066, 2062, and 2057.25.

The COMP needs to hold 2603.

Open:

ES does blast past 14772 and we have a higher high form yesterday. It also looks like that inverted H&S on the 60 mn is playing out. The only hold back is NQ in what looks to be a pin of QQQQ 50.
Bonds are selling, VIX is at lows, watch ES 1472 support on pullbacks.

Who cares about Palm? It's ORCL and RIMM that will matter.

Overnight (2):

Bonds catch a bid and down we go again. What a roller coaster. ES needs to hold that 1458.25 level. NQ would be 2047.

Dec. 19 (Bloomberg) -- German business confidence fell to the lowest in almost two years in December as rising credit costs, higher oil prices and the euro's appreciation threatened to curb growth in Europe's largest economy.

Overnight:

For the first time in three days, bond futures are in the red. There is a cluster of ma support on the 60 mn chart at 1465/1466. Weekly s1 at 1458.25 still remains key, since it is also 50% yesterday H/L.

PM Update:

Afternoon reversal indeed. NQ has made a 40 point move up from its lows, that's 1 QQQQ point. Quite impressive. ES needs to hold 1458.25 going forward.

Noon update:

NDX hits 2000, holds on a retest. Bulls are now praying for an afternoon reversal. Bonds are still a problem.

Morning update:

Since they have been selling beta, watch AAPL and its 20 dma at 182.50. If that holds and it finds buyers, we could finally get a bounce that holds. Otherwise, all those puts in QQQQ will have to be covered and we could see more selling. Once we get going, watch NQ 2047, overnight low.
Note that the Nasdaq up volume is 3 to 1 over down. I don't think the short side is the place to be right now, but who knows. We will see what they do prior to lunch. The problem for bulls is the competition from bonds.

Dec. 18 (Bloomberg) -- Housing starts in the U.S. dropped in November and permits for future construction slid to a 14- year low as sales fell and lenders made it tougher to get loans.
Work began on 1.187 million homes at an annual rate, down a less-than-forecast 3.7 percent from October, the Commerce Department said in Washington. Permits fell 1.5 percent to a 1.152 million pace.

Markets are losing their bid. Watch the ES gap close at 1456.75. NQ already did it.

Dec. 18 (Bloomberg) -- Best Buy Co., the largest U.S. consumer-electronics retailer, said third-quarter profit rose more than analysts estimated on sales of flat-panel televisions, laptop computers and video-game consoles.

This is a relief for bu;lls, although bonds are styill bidding. ES and NQ are above pivots.

Ugly close as the COMP loses its 200 dma, goes and fills the 2580 gap and fails to regain either at the close of trading. SPX is now below 61.8% 2007. Bulls better shape up and quickly.
NQ weekly S2 is at 2038.50 should we see more selling in the overnight session. However, volume was light and all this could still be a set up for a strong year end rally. They sure are making it hard, but no one ever said this game was easy.

SPX opened the year at 1418, that's less than 30 points from here. A 5% read for SPX in 2007 would put us at 1489. I doubt we get a negative year with energy stocks alone making up for the loss in financials. Remember that oil started the year in the 50's. Bears are definitely pushing their luck now.

Noon update:

They do indeed take NQ down to wekly S1 (2066.75). Bulls want this to hold, it's also 23 cents above QQQQ 50. My guess is we saw the lows at this point, but use caution in case we retest and actually hit 50. I doubt we get a real reversal until tomorrow, so expect chop. The ES 1473 level remains key. Bonds need to reverse as well.
COMP 200 dma is at 2599.80.

Open:

ES retest of overnight lows holds, now the challenge will be 1462 Dec contract or 173 March. The selling is a little overdone and there is a chance we could have put in the low for opex week if QQQQ can get past 50.67 and hold it. Financials are up.

If we really start selling, watch NDX 2033/2034, November gap close, which would put NQ near weekly S1.

Overnight (2):

Dec. 17 (Bloomberg) -- Europe's manufacturing and service industries grew at the slowest pace in more than two years this month because of increases in energy and food prices and borrowing costs.

The markets are selling off as we close the Dec 4 gaps, but can't hold a bounce above that. Bonds keep bidding and we have the makings of a very bearish open.

Overnight:

Bond bid and NQ loses the 20 dma, now resistance at 2094.50. ES December contract has key support at 1462, 61.8% 2007. It's worth a shot long if it holds (1472) since it also closes the December 4th gaps. Risk below that would push NQ (March) to 2082. Gap close for NQ will be 2062.50 (Dec) or 2082 (March).

CHICAGO (MarketWatch) -- So far, online spending is up 18% this holiday season, compared with the same days in 2006, according to data from comScore.
Between Nov. 1 and Dec. 14, online sales totaled $22.7 billion, the online measuring firm reported on Sunday. That's up from $19.2 billion in 2006.
Sales totaled $881 million on Dec. 10 alone, a 33% increase from last year. That Monday earned the distinction of being not only the heaviest online spending day of the season, but also the heaviest online spending day on record, comScore reported.

"Despite the strong surge in spending we observed at the beginning of last week, with both Monday and Tuesday easily surpassing $800 million in sales and showing very strong growth rates, the remainder of the week saw more modest spending," said comScore chairman Gian Fulgoni, in a news release. "However, we anticipate that spending at the beginning of this week will again be strong with most free shipping deals available until Tuesday, Dec. 18."

COMP needs to regain 2645 on Monday. NQ is sitting right at its 20 dma, weekly pivot will be 2102 (March).

Inflation is a definite no-no for stocks. But why is gold down? And is oil reversing its trend (see chart), which could reduce inflationary pressures? The markets will wrestle with these issues, but will it be next week or next year? We will soon find out. I would pay close attention to gold and the 800 level. One thing for sure: stay away from interest sensitive stocks.

BPNDX (NDX bullish percentage index) getting down there.

Lower lows and a COMP close below 2645. It's not looking very bullish, but volume was weak and the selling was not accompanied by a raging VIX. This feels off and I still think there is a big upside surprise coming, although today's action should put longs on guard. We might get a flush on Monday that could finally close those early December gaps. After that, we will see if bears have something left in the tank. Remember, next week is opex with loads of puts from all those traders who freaked out in November.


Good article, that echoes my sentiments: link.

Closing hour:

The market looks weak as we approach the close. I would not play hero, volume is light and lots can happen. Keep in mind those gap closes below should selling pick up.

Morning update:

Lows are still holding. If you like INTC, I would be a buyer here at 26.35 since it just closed the December gap.

Keep an eye on HYT (Blackrock). If it stays green, it usually indicates market participants are willing to take risks.

Open:

Beras cannot drive this lower, at least for now. ES (Dec) is holding 1475. Watch today's gaps, NQ March at 2114. COMP 2645 is also on the radar in terms of support.

If futures can keep this status quo, i.e. a higher low and higher high from yesterday, we could see a trend turn. This is classic pre-opex flushing, normally bullish for the following week, but never underestimate the ability of the markets to confound even the most seasoned traders.

Pre-open:

March contract 12/4 gaps for ES are 1472.50/1487.75 and for NQ 2082/2105.50.

Dec. 14 (Bloomberg) -- U.S. consumer prices rose more than forecast in November, driven by a jump in energy costs that may raise concern inflation hasn't been tamed.
The consumer price index increased 0.8 percent, the most since September 2005, after a 0.3 percent gain in October, the Labor Department said today in Washington. Prices excluding food and energy, known as the core rate, climbed 0.3 percent, also more than anticipated.

Futures were not happy, but at least so far have not made daily lower lows. NQ held the 20 dma, at 2095, for the March contract.
Watch the ES December contract and the 1474.75 level. For now, the low is 1476.50. This area needs to hold or we could see lower lows and possibly a close of that gap at 1463.25 (Dec.).
This is obviously bad news, but we have to see how much is priced in and where is oil going from here. If oil keeps trading lower, energy costs will come down. Watch QM and the 90 level.

Clsoing hour:

Bears could not make lower lows all day once we hit the intial one and now we have probably forged a bottom going into next week. As I said yesterday, buy those dips. COMP once again held on to 2645, a very key level.

Noon update:

We made a lower low and bounced back above the original overnight lows for ES. If you went long, that is where you should place your stop. This selling is unwarranted and could be a great buying opportunity. We tested yesterday's lows and they held. Bonds are selling and the VIX is moving to the lower end of the day's range. Money will flow to stocks eventually, if not today, then next week. This is typical pre-opex flushing where smart money buys calls/sells puts into the following week. It can be different this time, but I will stick to what has been working so far.
If daytrading, selling bounces is still the order of the day, just beware of a squeeze and the potential for a mid-day reversal. NQ has been holding the 10 dma and the COMP is back above 2645 (see yesterday's post).

There are still some traders stuck on buying oil at any level. I would not take that trade if the dollar keeps getting stronger. Oil could plunge if the greenback reverses the long term downtrend.

Open:

Beras cannot make new lows. ES (Dec) holds on to weekly S1 for now. Internals are quite bearish, so don't expect miracles today, at least for now. But if ES can hold 1475 (1485 for March contract), we could have seen the lows. If we do flush lower, watch that gap close at 1463.25 (Dec).

Pre-open:

Remember those gaps, ES 1463.25/1479.25 and NQ 2062.50/2092.50. If we get a flush down, we could close them. Otherwise, see if current overnight lows hold (ES 1471 and NQ 2078). Other support will be ES weekly S1 at 1474.75.

Dec. 13 (Bloomberg) -- Retail sales in the U.S. increased twice as much as forecast in November, easing concern near- record fuel prices and falling home values would trip up consumers.
The 1.2 percent increase, the biggest since May, followed a 0.2 percent gain the prior month, the Commerce Department said today in Washington. Purchases excluding automobiles jumped 1.8 percent, the most since January 2006.

Dec. 13 (Bloomberg) -- Prices paid to U.S. producers climbed at the fastest pace in 34 years in November, pushed up by surging costs for fuel. Excluding food and energy, prices rose the most since February.
The 3.2 percent gain, twice as much as economists had forecast, follows a 0.1 percent increase in October, the Labor Department said today in Washington. Core prices, which exclude food and energy, jumped 0.4 percent after no change the prior month.

Now maybe some understand why Bernanke only did a 25 basis point cut.
Initially, the markets will take this negatively, but after some re-evaluation, we should rally. Watch ES 1474.75.

My call for 2008 to be short bonds and long dollar is on tap, it seems..

In the past two days of selling, the COMP managed a close above 2645, a very key level since it represents 38.2% of the entire 2000/2002 correction. As long as we hold this level at the close, the NASDAQ is in good shape. Resistance is still the 50 day moving average, currently at 2715. Bulls might have to wait until next week when quadruple witching gets into gear. Expect more weakness tonight, but we should be close to a buyable bottom. Watch those bonds, they will tell you where money is going on a short term basis.

Closing hour:

We get the pre-opex low, it seems. NQ does a very sharp bounce from its 20 dma (2070), finishing the day well above 2100. ES almost closed the old gap of 1463 with a low of 1468.75. This should be good eonough barring a major catastrophy. We should get some noise tomorrow, but I would be a buyer of dips into next week.

It also looks like they want to hold QQQQ 51 for opex.

Contrarian note: Cramer is getting more and more bearish and that is bullish. His critizism of the Feds is childish and shows his ignorance. 25 more basis points more is not going to make a big difference, but it sure as heck makes a difference for the dollar, currency stability and inflation. Besides, stocks, especially techs, do well on rising yields.

Morning update:

ES (SPX e-mini futures) pulls back to 50% of the day at 1500.50, current support. Resistance is 1508. NQ (NDX e-mini futures) went as high as daily R1 and is now at gap open (2126). We could have seen the highs for the week yesterday, but we also probably saw the lows. All in one day, a perfect ES weekly R1 to weekly S1 in a single day. That's 50 ES points. Going forward, we have this huge gap to contend with ahead of option expiration week so I do expect a pullback tomorrow or Friday.

QQQQ traders note the 50 day moving average at 52.15.

Dec. 12 (Bloomberg) -- The Federal Reserve plans to ease ``elevated'' short-term funding pressures by injecting cash to banks through auctions and providing $24 billion in currency swap lines to the European and Swiss central banks.

The Fed is coordinating the measures with the European Central Bank, Bank of England, Bank of Canada and Swiss National Bank, the Fed said in a statement in Washington.

It's off to the races again. Watch all 10 dma's on pullbacks into the rather large gap.

Overnight session update:

It looks like equities decided that the selling was a little too hysterical and they caught a bid just above ES weekly S1 (1475). We will see how the open shapes up, but again, if we lose 1474.75, watch for that gap below.

Overnight trade suggestion:

If ES 1474.75 breaks, we could see 1463/1465 (gap close and 20 dma), which is probably a solid buy going into opex, if 1460 holds(S1). The reason I see lower lows tomorrow is ISE at 185. Too much optimism, which needs to clear out by Thursday.

PM update:

ES hit weekly R1 at 1527 and that was all she wrote. The gap close at 1525 was also critical. Did anyone notice how once again they sold off futures 30 seconds before the news came out? The SEC goes after Martha Stewart, but never the crooks in the pits...
In any case, 25 basis points is exactly right and once we finish this overbought selling, we should get ready for an opex rally next week. Cramer and company are crying like babies, but the job of the Feds is not to bail Wall street, it's to protect the buying power of Main street. In the end, stocks will be just fine.

ES has a gap to close at 1463.25/1479.25, with weekly S1 at 1474.75 and 20 dma at 1465.

Morning update:

Pre-open, ES went up and almost closed the old gap at 1524.75 (overnight high was 1524). Opening trades have seen resistance at yesterday's highs, NQ 2144.75 and ES 1520.75. We still haven't tested the overnight highs, which had NQ very close to 61.8% November. Weekly R1's have not been hit either, ES 1526 and NQ 2163. By the way, there is a strong correlation between weekly R1 for NQ and 50% projection November at 2164.

Dec. 10 (Bloomberg) -- Texas Instruments Inc., the biggest maker of mobile-phone chips, said fourth-quarter sales will climb to at least $3.5 billion, raising the low end of its forecast. The shares advanced 4.9 percent in late trading.

This will be a shot in the arm for semis. NQ resistance is 2151 and 2163. The COMP did its first close above the 50 dma in a month.

Morning update:

ES is back in the 1508/1525 gap. Bonds are all over the place, but TNX has resistance at 41.40. NQ came close enough to overnight highs to give us a slight pullback. It's choppy, but bulls are still in charge with a solid AD line and VIX at lows for the day.

Watch the COMP 50 dma at 2718.

Start thinking about your strategy for the next few weeks. Once we get past the Fed volatility, we will enter the year-end window dressing saga. Performing stocks will be bought and underperforming sold. So if you are thinking of bottom fishing out of favor stocks, wait for next month, or the last day of this year. That is the time to buy them (DELL is a good example).
As of Monday and futures trading, you might want to hit either weekly R1 or weekly S1 on ES and NQ and enter the counter-trend ahead of the feds.

One of your clues will come from the ten year. I have put up this TNX monthly chart a few times and here is the update.
We are now resting right above the 1998 and 2001 lows, around 4.1%. We had a two month battle testing the lower 3.8% level and it held. I expect it to hold for many years as I think the bond bull market could be crawling to an end. However, interim resistance is right here and bonds could catch a slight bid on Monday, putting pressure on equities. I think the Feds would be mad to cut 50 basis points, so expect 25 points as they throw a bone to the markets and the incompent financials. But frankly, the world will survive at these levels and there is no need to stoke inflation any further. Support will be the November close at 39.72.

The big trade for 2008 could very well be long dollar and short bonds. Get ready for it and use weakness/strength to leg in.

Both ES and NQ run up to their respective 50 day moving averages. It's probably time for a pause, support will be 2111, monthly pivot for NQ. Below that, we have multiple unfilled gaps. ES is also bumping up against the 11/6 gap, 1508/1525. This market is not about to keel over so I would not jump on the bear bandwagon quite yet. For now bulls get respect, but if you are not long and want to be, you might want to wait for a pullback. If we don't pullback and keep moving higher, you can bet they will start collecting some chips at ES 1525. NQ weekly R1 is 2151 and also confluence 61.8%, so that will be big resistance if reached.