TODAY'S ACTION

Looks like the financials led the market. Down. As much as traders want to be all gung-ho long and everything, it's important to keep an eye on the weakest sector. Take a look at C, JPM, WFC, BAC, and many smaller names. They all broke their uptrends. C, especially, formed a breakaway gap down on large volume. These types of gaps make it extremely difficult for a stock to recover in the short and intermediate-term.


So, what's been doing fairly well long-term? The utilities, because they haven't been going anywhere. Other sectors such as the materials, industrials, consumer disc. & staples, among others, are threatening to break down. Yesterday, I mentioned that the market cannot rally without the financials. This remains true. The overall health of the market depends on this sector. In addition, we started making more new lows than highs. The $NYHL and $NAHL are negative once again.


As for index breakdowns, the DJIA is leading the decline, followed by the SPY, R2K, and the COMP. The important matter is how the market is churning at the 50-day MA. This has been going on for over a month now without much progress at this key intermediate support level. Usually, you want to see the market use the 50-day MA as a "springboard" to propel itself higher. It is presently not the case.

We still have one major support level at 855 to clear before we start a multi-day decline. The focus continues to be on the financials, especially C (and JPM on the 15th). The trend is intact until it isn't. The financials have broken their trend and it appears that the market will follow for now.

SPX Initial Support: 860
Resistance: 20-day @ 892
Resistance: 30-day @ 885
Resistance: 50-day @ 882

Also, take a look at the VIX. It broke out via breakaway gap up:

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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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