FRIDAY'S ACTION

There is nothing new except that we are close to bursting out either up or down. I am guessing that some movement will occur ahead of Tuesday's 8:30AM GDP report. The consensus is -0.5% with a range of -0.8 to -0.5. The previous reading was -0.5%. I don't know how the consensus could remain the same as Q3, but whatever, everyone expects negative growth.

We also have Consumer Sentiment, Existing and New Home Sales (all three @ 10AM). The U. of Michigan sentiment index is expect to come in at 58.6 with a range of 53.6 to 60.2. The previous reading was 59.1. Existing home sales are expected to come in at 4.9M with a range of 4.750M to 5.04M. The previous reading was 4.98M. New home sales are expected to come in at 420K with a range of 360K to 490K. The previous reading was 433K.

Back to the charts. If we breakout then we formed an ascending triangle. If we breakdown, it's a bearish wedge. Looking at the 45-day intraday charts, a major move is most likely going to happen before Christmas given the lack breathing room at the end of the triangle/wedge.

The Dow appears to be the weakest. The Russell 2K is the strongest while the S&P and Naz remain 'neutral'. As for the moving averages, the Russell 2K is above, the Naz is sitting right on top, and the S&P and Dow are both below it. All four indices are bound by the 20-day and 30-day MA's in some way.

Looking at the VIX, we formed a 'hammer' candle, which is usually a reversal, but confirmation is needed. Upon layering it, the VIX is sitting right at the 100-day MA. The VIX tested the 100-day MA on Thursday and on Friday, the VIX managed to recoup most of its losses (notice the tails on both days). We "may" see an upside reversal on the VIX on Monday.

As for sectors, healthcare is the strongest. Utilities remains neutral. All the other sectors have to move up quickly because they are a hair away from breaking through their respective lower trendlines. The financial sector may be forming a head and shoulders. The industrial and technology sectors are forming lower highs (the tech sector technically broke down).

This entire month has been riddled with headache and a lack of reliable direction. I'm sure there was a lot of impulse trading going on. Once we break out or down, it will be easier to determine direction. Until then, traders have to either daytrade (very quickly) or sit tight and be patient (remain hedged), or remain in cash. Use the MA's and support/resistance as your guides.

For the 45-day intraday charts:
-the blue line is the 50-day MA (325p.)
-the green line is the 30-day MA (195p.)
-the pink line is the 20-day MA (130p.)

SPX 1-day

SPX 3-day

SPX 5-day

SPX 10-day

SPX 45-day

DJIA 45-day

COMP 45-day

Russell 2K 45-day

VIX 6-month

SPDR Select Sectors

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WEEKLY SECTOR PREVIEW

With the exception of energy, every sector is exhibiting bullish short-term signals. I said short-term because anything beyond that is indeterminable given the ever growing uncertainty in the financial markets. Volume is rising for many of the sectors, especially on the up days, and many have also broke out above the 20-day MA. A confirmation up day is needed for a safer, low-risk entry. This confirmation day will also be marked with large short covering. Any days from here on out should be marked with higher and higher volume. Energy is a lagging sector, but I believe oil will be up for a few days to follow the market leaders. The initial target is the 50-day MA, where an initial failure is more than likely.

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WEEKLY SECTOR PREVIEW

We had a very quiet, low volume week, but the reason why last week was so important was because it could be a set up for a nice opportunity for shorts. We’re still very much neutral with consumer staples, energy, and health care being the most neutral sectors. The financials, materials, consumer discretionary, industrials and tech sectors appear to be exhibiting signs of a bear flag. The utilities sector is the closest to forming an uptrend from here. At the very least, we should expect a pullback. The financial sector shows the most promise for a successful short.

Keep in mind that we have various reports this week, including the all important Employment Situation coming out on Friday. Also, look out for a response from Black Friday’s sales figures and GM’s congressional hearing. All you need to note in the charts are the price/volume divergences in almost every sector and the nearest major support/resistance areas.

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WEEKLY SECTOR PREVIEW (11/17 - 11/21)

The uncertainty surrounding GM will not allow this market to begin a powerful rally. There is too much uncertainty and too little time. This uncertainty alone will be able to drive the markets lower. What must be absolutely considered is the fact that we could start another primary leg down. This will be true if the market cannot 1) cancel out Friday’s 4-5% loss on Monday, and 2) break through the 20-day MA within three days. The market must achieve both, or else we will be testing the lows again at which point a breakdown is almost entirely certain.

5 out of 9 sectors are in the process of forming bearish continuation flags (to the downside). The other 4 are forming symmetrical, ascending, and /or descending triangles. Although these sectors are the strongest, they will stay within a range until a clear direction is determined. Most volume and outlooks are bearish and I wouldn’t give any individual sector a “bullish” outlook given the continued consolidation.

The point is that we can’t hang around in the tight range here at the bottom. This is 100% bearish and will be the precursor to another leg down if #1 and #2 are not accomplished. In this market, each day counts.

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WEEKLY SECTOR PREVIEW (11/10 - 11/14)

4 out of 9 sectors are above the 20-day MA and 5 out of 9 are below the 20-day MA. Every sector has experienced a sizeable volume drop off and a breakout of breakdown is expected to occur shortly (may or may not be “immediate”). 7 out of 9 sectors formed an “inside day”, meaning the market could be taking a breather for a continuation to the downside, or it can the beginning of a counter trend move for an unspecified number of days.

The XLB, XLY, XLF, XLI, and XLK will all have to test their 20-day MA resistance areas (marked in green boxes) before they can proceed higher. Another thing to note is that the open-close range on Monday’s candle (if positive) must exceed the open-close range of Friday’s candle. Otherwise, the market will most likely reverse to the downside via a narrow range day. About half the patterns are forming “possible” inverse head and shoulders patterns and the other half are forming symmetrical and ascending triangles, and possibly wedges.

As this moment, China’s news on the $586 billion stimulus has gapped up the Asian markets and the U.S. futures market. Monday’s close will give a more clear direction for the markets this week.

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