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.

.. the NYSE was weak today, especially when compared to its stellar performance a week ago. That now makes two days in a row that the NYSE was not able to turn the bullish corner.  In the past month of chop the NYSE has been the leading signal to which the others caught up. So either that cycle has been broken today or the NYSE weakness is signaling the top is in place and we are getting ready for a pullback in here.

The number of new highs closed today on the NYSE was 292.  In order to move our 5 DMA momentum indicator for the NYSE long bullish column we will have to establish a pace our around 100 at the initial 30 minute open.  That is only 1/2 of what we needed today.  So a weaker opening than today is still possible to keep the momentum moving upward.   A great opening and we will be on board for another thrust up to new highs.

The opening tomorrow should be a good hint at what the day has to unfold.

.. the NYSE.  You will see the NYSE show up weak in both this chart and the 52 week new highs.  It is this lagging that kept today's  movement from being extremely bullish.  The NYSE bars put in nice recovery over the last three days but the strength did not match the strength of 5 days ago on the NYSE and therefore that index gets a neutral score while the RUT and NDAQ each get a +2 score.

We need to see some follow through there otherwise we are just still chopping around in this consolidation zone.

Again we have turned from neutral to very bullish.  All three indices are moving to new highs and remain above their 20 DMA.  The RUT has caught up with the NYSE in sentiment showing a 68% of stocks trading above their 40 DMA.  The NASDAQ composite is lagging behind, perhaps a push tomorrow will drive it upwards.

Back from Bangor-Maine where I spend some great quality family time with my extended set of relatives and my mom.  It was fantastic to get together.  They are a hardy lot that live in the north country. 

Now back to work.

The week closed mixed with the DOW down -1.36% and the Russell closing up 1.67%, the small caps showing relative strength is a good sign.

A look at the Charts:

The 10 Day High-Low chart has again swung to neutral from the previous days bearish state.  The markets are getting very difficult to predict.   Instead on nice swings of momentum change the charts are looking like they are in fibulation and need a break-out one way or another to get some type of rhythm back in the price action.   Somebody bring out the paddles or call the market dead..

The 40 DMA % Index chart still is making a positive climb showing underlying strength in a broad base still exits. It scores a +6 today from yesterday's neutral scoring. 

The 52 Week new highs recovered from the Thursday selloff with the Nasdaq composite and the Russell 2000 able to turn a one day bearish signal back to bullish.  The NYSE did not have enough strength to do so. Monday's open will have to be quite strong to keep the momentum going and to get the NYSE join the stronger indices.

 

Watch for an opening 30 minute new high of around 200.  Anything less will indicate a high probability that the NYSE 52 Week new high will stay bearish into the close.  Above 200 tells us that the bulls have regained the momentum.  Any sell offs in that case should be bought.

Overall the three charts score a +10 which is on the bullish side but they are swinging everyday here between bullish and bearish.  I would like to see it put together a streak in here.

The week will bring lighter volume as the markets wind down for a Christmas weekend.  Short term scalp and swing while we wait for the markets to decide on a definitive direction from what is turning into a two month consolidation.

News Next Week:

Looking ahead at economic news for the week.  At midnight Sunday the Bank of Japan issues its monthly report and news positive or negative could impact the dollar overnight.  The bulls need China, Japan and Eurozone to set the markets on the right course for Monday's open. 

US news over the week starts on Tuesday with the revised GDP numbers for the 4th quarter.  Expectations are that we will stick with the 2.8% number that was recently revised down from 3.2%.  Also on Tuesday at 10am EST  the Existing Home Sales Numbers are released.  These should have a direct intraday effect on the market.  At the same time the Richmond Manufacturing Index will be released and there is a high expectation of a +4 on the reading but recently these numbers have been disappointing.  That is something to watch. 

Moving to Wednesday at 8:30 am we get core PCE price Index, personal spending and income.  At 9:55 am the Michigan Consumer Sentiment Index and at 10am New Home sales will be released.  The Crude inventories are out at 10:30 am on the same day.

Christmas Eve the news continues at 8:30 am with Durable Goods and initial jobless claims at 8:30 and the Natural Gas Storage numbers at 10:30 am.

.. 0 which is neutral.  We moved from a -6 to a 0 with all three indices gaining points on having a higher raw index value, but that value was not greater on any of the indices than 5 days ago, so the moving averages all score a -1 for a total of -3 which added to the +3 for increasing  bar strength yields a 0.

If the NYSE can show up for a follow through day than this indicator will start to turn to the bull side.

The world did not play nice last night while we slept. In Asia while Australia was marginally in the green the Hong Kong closed down a solid 1% and Japan erased what was a nice 1% gain to fall apart in the closing hour to close red.  Not a strong showing from Asia.

Currently Europe is awash in a sea of red.  The major indices the FTSE in the UK is hovering close to the -1% area, the DAX about 1/2 of that at .56% negative which pretty much defines the range.

Econ numbers overnight were not terrible except for the retail numbers out of Great Britain at 4:00 am this morning showing a -.30% increase in retail where they had expected a growth of .5%, that is almost at 1% swing to the negative side.  Clearly now there is some softening in the "first to emerge" nations of Europe.  That puts a string of numbers together from Great Britain, Germany and France that have been consistently falling outside the range of expectations and recovery.  The question is are they leading us now or is it the other way around. 

Overnight Dollar Index Gains over 1%

The DXY gained over 1% from a 4pm close yesterday until the early morning hours.  The reason for the huge daily gain lies in the continuing unwinding of  the dollar carry trade.   It appears to be related to the Fed meeting although I have not read exactly what has triggered the sudden momentum increase but the direction is definitely toward a stronger dollar. I talked in the weekend update video a little about the dollar.

We have our own numbers to work through at 8:30am which is the Jobless Claims. Fed-X released some encouraging numbers this morning lending more evidence that the US economy is bouncing from its bottom. It has plenty of stimulus now so let's see how hot it can ignite.

The futures trade only one way now, counter to the DXY.  The DXY is up 1% the futures are down 1%.  At some point, at least if the bulls want to take it to the next level, those shackles need to be broken.  The futures down 1% today premarket open will  be tough on our indicators and will zap buyers strength to take us to new highs.

We will wait for the 8:30 news to fix the market open and then wait until 10am to see how the market reacts to the gap.

See you in the Markets!

-RLT

Adding from the 3 charts below we score today a 12 out of 18 which continues to be bullish, but it is slightly weaker than yesterday +16 score.  It bares watching, a weak start could mean another 3% type pullback for a run at the end of the year into the first week in January for new highs.

There appears to be no Asia news tonight so we will have to see if China can get out of its funk and Japan can follow through yesterday's strength, perhaps that can feed into Europe.  Great Britain is reporting retail sales numbers in the morning.   Strength in the number could slow the dollar's gains and keep the US futures up, but we have our own set of numbers to contend with including the pre-market initial jobless claims scheduled at 8:30.  A 460K to 475K number should be just right to keep us even keeled into the opening. 

A flat open would be good for the bulls.  What the bulls don't want is a gap down open since this will zap so much of the built-in momentum already in this market.

If you are in the trading room we will keep you updated.  If you are following us on twitter (RedlionTrader, Tomandprisha) you will get some delayed updates.

If you want to visit us in the trading room doing our live trades use this link: http://bit.ly/5h5sk1
we do market update at 9:15 pre-open for our daily game-plan and regular updates all day long.

We are attempting to fill our remaining seats and I think there may be only about 5 left now before the end of the year.  You can read more about our special at the http://ttthedge.com website.

Adding from the 3 charts below we score today a 12 out of 18 which continues to be bullish, but it is slightly weaker than yesterday +16 score.  It bares watching, a weak start could mean another 3% type pullback for a run at the end of the year into the first week in January for new highs.

There appears to be no Asia news tonight so we will have to see if China can get out of its funk and Japan can follow through yesterday's strength, perhaps that can feed into Europe.  Great Britain is reporting retail sales numbers in the morning.   Strength in the number could slow the dollar's gains and keep the US futures up, but we have our own set of numbers to contend with including the pre-market initial jobless claims scheduled at 8:30.  A 460K to 475K number should be just right to keep us even keeled into the opening. 

A flat open would be good for the bulls.  What the bulls don't want is a gap down open since this will zap so much of the built-in momentum already in this market.

If you are in the trading room we will keep you updated.  If you are following us on twitter (RedlionTrader, Tomandprisha) you will get some delayed updates.

If you want to visit us in the trading room doing our live trades use this link: http://bit.ly/5h5sk1
we do market update at 9:15 pre-open for our daily game-plan and regular updates all day long.

We are attempting to fill our remaining seats and I think there may be only about 5 left now before the end of the year.  You can read more about our special at the http://ttthedge.com website.

The 52 week new highs for the NYSE, NAZ, and RUT today combined together for a score of +4 which is bullish and the same as yesterday's score, although the weakness rotated from the NYSE to the RUT.  The NAZ has now put in a solid 3 day run of 52 week new highs.  The hurdle bars for tomorrow are moderately high so the market is going to have to show some umph into to keep this indicator in the bullish mood.  A rough start tomorrow, such as a poor unemployment claims number could put the kabash on our run.

The number of stocks trading above the 40 DMA went up today in all three of our tracking indices despite the sell-off into the close. That keeps this index into the very bullish camp.

It look to me that the stragglers out there are moving up as the index price action is not advancing as fast as the breadth would indicate it should be.

The 10 Day High-Low moved from a strong bullish trend to a slightly bullish trend today with weakening bars in the NAZ (middle) and the RUT.  I am really surprised at the RUT performance on this chart as it appeared to be the strength today yet today's 10 day highs are lower that yesterday.  The introduced weakness is a concern that we may be topping in here.  This tight trading range is very difficult to figure out. I will do a mid-day run tomorrow and see if we are getting any RUT improvement.

There was much strength in the market on Monday, particularly in the NYSE.  You can see on the chart how the NYSE's last bar is green.  This indicates that both the moving average is moving higher and the current bar is greater than the previous bar.  While the RUT and NAZ had larger bars, they were not strong enough to effect their moving averages to positive but did manage to move them from Friday's bearish mode to neutral today.

Overnight the markets were weak in Asia. China was down about .8% and Japan did a little better than that but still closed red.  In Germany, the ZEW sentiment survey was released.  This is a survey of  German analyst ("smart money") and their feeling on the future strength of the economy.   The raw ZEW report is actually interesting.  The number for Germany was within expectations but the analyst view for the all of Europe shows increasing weakness over last month's survey.  The French CPI numbers came in lower than expected and this weakened the Euro at 2:45 am this morning adding to the tumble of the futures.

We have a slew of our own data out this morning:

We would expect the PPI to be a little "hot" because of oil which has since pulled back . A higher than expected number should be forgiven as far as the markets go, but it could drive the dollar to further strength.  Assuming there are no large outliers in today's numbers and based on yesterdays strength we should see  either a follow through day today or a NR7 consolidation day.

But we would have to continue to break the bonds that tie the market to the dollar.  Today's price action will tell us a lot about this market.  If data falls in line I am interested in buy this weakness in here.

Happy Trading today.

Hope to see you in the trading room

http://ttthedge.acrobat.com/traders

All three indices today made both higher bars and turned their 5 day moving averages positive. This is a sign of building strength.  The NYSE made a higher new 52-week-highs value today (311)then the previous new high from 6 days before (see how the magenta bar slopes up.. if we draw a bar on the NYSE index it would be sloping down) but the NYSE index did not make a new highs today.  That is a bullish divergence and adds strength to the charts for the bulls case. 

I think we can begin to build the case for the start of a thrust. My worrisome indicator is the Zweig which did not start from over bought as most thrusts do.

Wanted to try again doing a video to go over the charts using different software this time.. Enjoy..

 

Check out our trading website at http://ttthedge.com or visit us starting Sunday night at http://ttthedge.acrobat.com/Traders

.. The NYSE improved its day to day strength on the 10 Day High - Low, but the NAZ and R2K weakened in here.  This indicator for the markets now post a -4 (up from Thursday -6) due to the NYSE strength.  Notice on the last Buy/Sell cycle that the NYSE flashed buy before the rest of the market, Monday would have to be a follow through day for the NYSE and it is also the beginning of OPEX week so we will definitely be watching this chart on Monday.

.. 0.  Just like the 10 Day High - Low chart in the previous post, the 52 Week New Highs set higher bars than yesterday, but not strong enough to move the 5 day moving average back to the upward direction.  The net score is therefore a 0.  When added to the previous scores of 0 and +2 our overall score tonight is +2.  Last night we were at -6, so that is a bullish improvement with momentum heading up.

There is much that can fail in here as the weakness in the RUT in particular today was disappointing as far as follow through strength.

 

Despite the strength in the price action today there were some breadth issues to worry about.  The poorer performance of the RUT and NAQ left our  40 DMA % Index indicators weaker on those two indices but the NYSE's price action keep the group still this side of the bull bear line.

Nothing to say here that hasn't been said over the last 28 days.. Hey isn't that a movie 28 Days?

.. it just languishes here.. there is no movement or break toward the upside or the downside.  I did do some looking last night and found out that the indicator often spends a large amount of time in this neutral area. It  appears that there is a higher probability of moving into oversold when breaking out than overbought.  So there is a downward bias to this languishing. 

.. is bearish, along with the 10 Day High - Low chart which put in the same -6 score.  Our 40 DMA % Index remains strong in here though with a +6 score adding together we get a -6 which keeps us in a bearish mood.

Our holdout 52 Week RUT high confirmed today what the other indices were telling us, there was no interest in bidding shares up to new highs.  We would expect 3 to 5 more days of weakness in here based on this indicator.

Despite today's bullish action into the close the New 10 Day High-Low shows waning momentum from the markets.  The RUT remains the strongest in here. Nothing short of a gap-up and run will be able to keep the momentum from continuing to move down over the next 3 days.  All three momentum indicators are down today as are the day to day bars so today we score a -6 on this panel, which is bearish.

Our 40 DMA % Index chart has all three indicators still running is a bullish direction with their DMA's acting with and upward bias along with the indicators.  The weakest indicator is the NYSE which did however, manage to put in a positive day so all three indicators moved more positive today and are above their 20 DMA's. That puts the score on this indicators to +6 which is bullish.   But you will see two more charts tonight that are scoring -6 which is bearish so the downside is still better bet. 

The Zweig is now 26 days since being either overbought or oversold. although not that unusual it is the longest since the March 9th rally began and is another indication that this market is changing.

We are rounding the corner here on the way down.  The RUT was the strength today although all three put in lower new highs.  It would take a strong open tomorrow to pull these back up. Usually we would get a couple more up days in these cycles so a two day stutter here is not out of the question, but again it will take some world wide help overnight to turn the ship back around.. for now it looks like down..

The momentum is now officially gone in the 10 Day High-Low.  This mornings opening pretty much took care of that.  We should new drift lower before regaining upward momentum.  This indicator however could use an extra day here.  You can see in the middle of November where it skipped a beat for a couple of days before resuming some upward momentum. 

Tomorrow's selling is key.

Our 40 DMA %'s did not cross over their 20 day moving average putting this signals into a score of 0 or neutral.  Look how strong the RUT and NQ are compared to the NYSE which is currently correcting harder than the others (but it is at 58% of stocks over their 40 DMA compared with the NAQ and RUT whcih are 44.90 and 49.95 respectively.

 

While the NYSE clearly shows weakness compared to yesterday, the NAZ and RUT are showing some surprising strength in there.  The NYSE one minute ticks are currently in an uptrend, while the other breadth indicators have moved from bullish to bearish based on the weak opening.

The strength today is in the RUT while weakness is in the DOW which was in a need for a good correction.

The ES 1096 area is today's demarcation line.

Germany over the last few day has produced some fairly weak and disappointing economic numbers. It's month over month factory order numbers showed a decline of -2.4% and when charted shows a steady decline from the summer top. 

This certainly sets-up worries of a second dip here and tell us that the economy in the Euro zone are perhaps not as strong as originally thought.

Last night, or for us east-coast Americans at 6:00 am NYSE time, the German industrial production month over month numbers came out confirming yesterday's weak factory orders. The expected number was already a weaker number with a predicted expansion of only 1% in factory production.  The number came in not has an expansionary  number but contraction, a cold -1.8%. 

Germany and France were the first to declare to be out of the recession, now the question is are they falling back in or is this just a stutter during the recovery with America now pulling up the rear and we will all lift here soon?  We need to watch our own numbers

One thing it does mean, no interest rates hikes in Europe yet and if America does continue its recovery it will do so with a stronger dollar.   Stronger dollar equals lower oil, gold, stocks.. at least in the short term until the shackles of co-dependence are broken.

Something has to give here.. All we can do is scalp during the day for a few cents while we wait for either the bulls to take control or for the bears to dominate.

The other of my breadth indicators are setting up to really test this market tomorrow. With a strong open the Zweig might setup and go overbought.