Quite a week we have in store as push to new highs with OPEX expiration and kicked off earnings,  Alcoa lead the earnings parade with their usual disappointing routine.   The Alcoa management must do that on purpose?  They are so creative and reliable that it is amazing to watch.   The markets took a little step back and Alcoa seemed to have been priced correctly into the close as not to cause too much damage.  So we continue on the week:

Asia

Japan now has put in 2 days of selling off with continued weaker turn in Hong Kong but the Shanghai put in a strong day testing the lows and then rallying into the afternoon with a 1% gain for the day.

Europe

Slow start to Europe this morning selling off from the start and currently trading on their lows.

United States:

Economic News:'

8:30 news could be dollar moving as we take a lot at trade balances and the import price index.

Earnings:

We had some early morning earnings that outdid the Alcoa announcement hopefully moving  in the bull direction.  High Tech will get their first glimpse tonight as Intel and Linear Tech have been called an now must show their hands.

Charts:

10 Day High – Low:
Nasdaq charts did not generate last night but I did a hand calculation and the Nasdaq along with the NYSE and RUT put in neutral scores yesterday.

40 DMA % Index:

NYSE, Nasdaq and RUT are still below their 20 DMA on this index, we are not getting enough conviction here to move index up keeping us in this perpetual grind up but no real breakout.  The NYSE and NASDAQ score a 0 where the RUT actually put in a weaker day yesterday and stays in the bear column.

52 Week new highs:

I am on the road this week so I don’t have all the charts like at home.  I have put up the Nasdaq chart which was by far the strongest yesterday.  It scores a +2 as it has turned up the 5 DMA and put in a stronger new day bar.   You can see clearly now looking back that we had some type of corrective event that last week of March.  Price action you can barely see it but the breadth charts all show the brief weakness followed by this current slow grinding push.  The RUT and NYSE didn’t have as good day as the Nasdaq  and were unable to turn the 5 DMA and therefore put in neutral scores.

 

Conclusion:

The charts score a neutral 0 day with mixed data.  The 10 Day High – Low was neutral, the 40 DMA % index was –2 and the 52 week new highs was +2.  The market is slowing drifting higher and higher but without a lot of conviction (that should be obvious in the volume).   Sellers have no reason to sell as the drift upward is strong enough to keep them in hold mode but the warning here is the number of buyers is drying up too and should the sellers want to get out.. watch out..  A downward move here could be pretty breath taking. Of course the same is true for an upward thrust.  Should buyers become more interested we could see a pretty good thrust… but I am more suspicious of the downside.

$SPX.X

Everyday I see a top.  I have a hard time scrolling down my charts as I think we are there.  You will notice that today I have the 1200 line as top (that was higher then yesterday).  I think we could test that today but am not a believer in breaking through, so I am more interested in looking at lows.  The 1194.50 area would close yesterday’s gap.  Below that there is resistance at 1192 then 1189.  Below that would be trouble.  That top 1200 is like a magnet if we do break through with some momentum we could rocket, however,   I think we continue to touch and probe and then fail only to try again so I will go long on any run up to 1200 where I will reverse and short for the next couple of days or unless we clearly establish a beachhead above the 1200 area.

 

The safe bet is up and the momentum is in that direction but not as convincing as say the end of February.  We either need some renewed breadth or a quick correction to clear the path for better gains.

Careful.. stops.. don’t be convicted to a direction.. the market isn’t.

 

Marlin aka RedlionTrader  http://ttthedge.acrobat.com/traders

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It looks today like another gap up.

Around the world while we were sleeping:

Asia put in another strong performance.  Good manufacturing numbers out of Japan helped to boost the Nikkei and the Yen.

Europe is mostly green across the board with a subdued rally this am, but green is green and our futures sit currently at +2.75 on the ESH10s.  That makes 4 days in a row of a potential gap opening.  The dollar is suffering weakness which also helps the bulls case.

US Economic News:

It is Christmas eve but our government is hard at work., passing healthcare reform and delivered as a Christmas present to all Americans and their guest.  That is not the only part of government at work we have numbers coming out this morning too, hopefully the bean counters get to go home after they push the buttons for the 8:30 releases.

The durable goods number could erase the gap this morning on the open.. The reaction to a terrible New Home sales yesterday and a less then stellar sentiment number was an immediate sell-off followed by buying strength through most of the day to close on highs in the NQ and RUT.  I would expect that weak numbers today will be treated the same.  This market wants to rally.

For the jobless claims, it would be great if Santa could deliver that decade down from last week and show continued downward progress.  What we don't want to do is jump back above that 500K number. Yuck.  So plenty of news prior to the market to either set the gap opening or erode it down to flat.

Outlook..

I ran my numbers last night and yesterday was very bullish.  The underlying breadth sentiment was in all three indices.  The topping signal for us is the Zweigs which have gone overbought  on all indices and will look for a reprieve, but they can stay overbought for a few days and this market with low volume and high breadth sentiment could explode.  It is like a Mento dangling over a bottle of coke. Watch the new highs and the A/D lines today.. if they start to weaken and accelerate to the downside than the show is over and head for the exits.

 

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It looks today like another gap up.

Around the world while we were sleeping:

Asia put in another strong performance.  Good manufacturing numbers out of Japan helped to boost the Nikkei and the Yen.

Europe is mostly green across the board with a subdued rally this am, but green is green and our futures sit currently at +2.75 on the ESH10s.  That makes 4 days in a row of a potential gap opening.  The dollar is suffering weakness which also helps the bulls case.

US Economic News:

It is Christmas eve but our government is hard at work., passing healthcare reform and delivered as a Christmas present to all Americans and their guest.  That is not the only part of government at work we have numbers coming out this morning too, hopefully the bean counters get to go home after they push the buttons for the 8:30 releases.

The durable goods number could erase the gap this morning on the open.. The reaction to a terrible New Home sales yesterday and a less then stellar sentiment number was an immediate sell-off followed by buying strength through most of the day to close on highs in the NQ and RUT.  I would expect that weak numbers today will be treated the same.  This market wants to rally.

For the jobless claims, it would be great if Santa could deliver that decade down from last week and show continued downward progress.  What we don't want to do is jump back above that 500K number. Yuck.  So plenty of news prior to the market to either set the gap opening or erode it down to flat.

Outlook..

I ran my numbers last night and yesterday was very bullish.  The underlying breadth sentiment was in all three indices.  The topping signal for us is the Zweigs which have gone overbought  on all indices and will look for a reprieve, but they can stay overbought for a few days and this market with low volume and high breadth sentiment could explode.  It is like a Mento dangling over a bottle of coke. Watch the new highs and the A/D lines today.. if they start to weaken and accelerate to the downside than the show is over and head for the exits.

I haven't been posting shots of the Zweigs lately because they simply have been boring.  Sitting in the neutral area they have not moved to overbought or oversold.  The lack of Advance/Decline patterns (which mimicked the price action) made for a very difficult call on the direction of the breakout.

We still have not made it to overbought on the NYSE but check out  the lighter indices:

Each one of them has managed to breakout to the overbought area.  While they can chomp around up here for a couple of days, it does tend to indicate that the top is very near here until a correction and then another thrust.

The RUT new highs are almost up to the highs set in October.  They are coming in strong.  We are now in 5 day cycle where we have to set consecutively higher new highs in order to maintain the momentum.  The 375 set today means we would like around 180 at the open.  That most likely would need another gap up opening and then a follow through on the half day.  The gap will be the clue.

.. all three indicators built strength today.   The DOW which I do not track was the lacked and the RUT was the leader.  It looks like one more day or at least one more attempt at a high or a high is in store.  I would expect the NYSE number to reach into the 40's before a correction will start. 

.. There is most likely still a little upside left from what has turned out to be a terrific year end thrust.  The indicators are starting to get to extremes and we are at a point where shorts most likely are going to be safe but waiting and patience is the name of the game here, waiting for the market to show its weakness.  Right now it isn't showing much weakness.

Bears are in retreat around the world this morning as even China puts on a good performance last night.

Japan was up almost 2% while China held  to about .7% after being up over 1% but sliding a little into the close.

Across the watery divide to Europe which is continuing it Christmas rally mood.

London is a leader this morning with a 1% rally and the rest of Europe is following along. All markets are in the green as of 7:40am this morning.

Morning Econ News:

Our ES futures are up 6 pts from their 4:15pm close which is quite strong, but there is some econ news that will either throw a little cold rain or add sunshine to today's parade.

GDP will most likely stay unchanged and this finishes the 3Q GDP releases and now we start a Q1 2010 cycle.

Existing homes if they hit their 6.25M expected number (the left Colum is expectations the right column is last report's value) that will show continued improvement in the home sector.  This news comes in a half hour after the market opens and could be a buzz killer if the market rallies in the first 30 minutes.  Eyes will be on the Richmond Mfg index at 10 am also as these manufacturing indices have hit a little rough patch in the last 30 days.

Today's Chart

Correlation.  That is when one chart looks a lot like the other chart.  If one chart is going up the other is also going up.  That had been the situation for the US stock market and the EURUSD forex pair.  From the chart below we are seeing that the strong correlation that existing just last week appears to be breaking as both the US dollar and the markets are in rally mode.

The good news is that the market can rally with out a falling dollar.  The bad news is that the market now has to fundamentally perform and can not count on a dollar carry trade to boost it's prices. Economic numbers are more important the ever as we shift gears here into an economic recovery mode.

-Happy Holidays

Marlin - aka RedlionTrader

As mentioned in the New 52 week high post, the NYSE was the cause of weakness today.  We will watch in the live trading room in the first 30 minutes  at the open to get a feel for how the breadth is performing.  You can see it in our live A/D line indicators as well as the market thrust indicator.

If we confirm during the day that the NYSE is going to turn to bullish long and the RUT and the NADQ maintain their long sentiment then I will be scalping on the long side.  If these don't set up I will be setting myself up to short in a 10 day window from here.

See you all tomorrow in the room.