December Opens Bullishly
by Jerome "Mel" Hickerson
Today’s session opened with strength gained from buying pressure from the futures, carried that strength through the 10:00 data releases, and moved upward in multiple waves setting the high for the day at 1:34. From then, the SPX had a gentle four wave descent from the highs into the close yet finished in the upper 25% of the daily range.
In many ways, today’s session was quite bullish. But the banks and financials were lagging today and these usually lead any sustainable rally. This will require watching tomorrow because I’ve found that either the banks and financials lead up after a day of lagging, or they lead downward. The canary in the coal mine Wednesday is likely to be this sector.
Last night in a message for subscribers only, I posted the following: “…the stats suggest (more than just a little) that Tuesday is an up day…. Unless you are really sharp with playing bounces, I encourage you to consider trading Tuesday with a Long bias.” This certainly played out today; indeed, making money short side was possible but you had to have good timing and be on your toes; money on the long side was easier. Our SSO swing reached the target of 38.00 but unfortunately we were stopped out by 3 cents first. But we still booked a nice return for the overnight swing position. This particular swing trigger has a good (almost 78%) success rate and triggers a few times per month.
As mentioned last night, I am beginning to lean bearish for the near term. The SPX continues to bump into overhead resistance without breaking upward. Today was the third test of that resistance and failed yet again. The chart pattern on the daily SPX chart is really quite ugly since November 11th; there is no trend and we have netted only a couple points since then. Today’s close was in almost the exact same spot as the repeating dojis in November; this was the fifth recent close within a point either way. We either move through this resistance soon (tomorrow?) or I think we fail, pullback and regroup before trying again.
When reviewing the charts, I still believe we are observing a topping pattern. Another push upward seems plausible and seasonality has to be considered; this is usually a bullish time of year.
For Wednesday, our model has generated a -6 indicator. This is a mildly bearish indicator suggesting a decline between the end of the opening hour and the beginning of the closing hour. My hunch is that we gap upward, test overhead resistance, then pullback. I know many of you are dying to get short; I still advise being patient. This run up for the SPX could easily have another 10-15 points in it; of course, it could fail right here. But I’d rather loose five or ten points by being late to enter on a move downward than get short 10-15 points too soon and possibly get stopped out, take a loss and then miss the move when it comes because I got stopped.
The market movers tomorrow are most likely to come from the Fed Beige Book at 2:00, although the crude oil inventories at 10:30 has also been a market mover.
Wednesday, December 2
Economics
07:30 Challenger Job Cuts
08:15 ADP Employment Report -155k cons.
10:30 Crude Inventories
02:00 Fed Beige Book
Earnings
Before: CHRS, PTRY, SYNO
After: ARO, PSS, JAS, SEAC, SNPS
Payroll services firm ADP releases its survey on private-sector employment shortly before the start of trading. Employers in the private sector are expected to have cut 148,000 jobs from their payrolls in November, after cutting 203,000 in the previous month. Challenger, Gray & Christmas will also release its November report on planned job cut announcements in the morning. In the afternoon, the Fed releases its periodic "beige book" report on the economy.
Mel’s Random Hits:
• Total tick for today was 322,000. This is the highest total since October 5th. Breadth was positive from start to finish; there were no negative 20 minute periods although the closes period was just before 3:00. From a breadth viewpoint, today’s session was bullish.
• Today's range was 13.39 points. Ignoring the gap at the open, the true trading range was only 8.91 points. A day like today looks easy on paper but when trading live, it can be much more difficult.
• Today's volume was 74.4% of the average daily volume. The first session of the month is typically a fairly heavy volume day; we did well to barely beat the 10 day average of volume.
• 6% of the SPX stocks closed with two day RSI above 90. 32% closed with RSI above 80. 6% closed with RSI below 20 and 3% closed with RSI below 10. We are nearing short-term overbought but not there yet.
• 59% of the SPX are above their 10 day moving average and 62% are above their 20 day moving average.
• 2% of the SPX stocks closed below their most recent previous lows.
• 70% of the SPX closed above their most recent previous high.
• 63.8% of stocks closed in the top half of today's range. (36.2% closed in bottom half.) Oddly enough, these percentages are identical to last night.
• 24.6 of stocks closed in the bottom 20% of today's range.
• 11% of stocks closed in the top 10% of today's range.
• 21.1% of stocks closed within 2% of their 52 week high. A large jump in this number today.
• 23.2% of stocks closed within 50% of their 52 week low.
• 14.6% of stocks closed within ¼% of their high for today.
• 8.2% of stocks closed within ¼% of their low for today.
• 87.4% of the SPX closed up for today.
• The 2 Day RSI of the SPX is 76. The Dow RSI is 77, NASDAQ is 76 and Russell 72. The NASDAQ and Russell have been lagging but seem to have played catch-up well today.
• Over the last year, when the final session of the month was positive, the following day closed positive every time except once (last December 1st). The average increase was more than 160 Dow points. Today continued that pattern with the Dow up almost 127.
• SPX components moved upward during the after hours.
• From the weekend report: “Swing trade setup: Go Long at the open, exit before the close on Tuesday.” This trade worked quite well.
Have a great Wednesday!
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"Mel"
ETF’s we trade:
Ultra S&P500 ProShares (NYSE: SSO)
Ultra Dow30 ProShares (NYSE: DDM)
Ultra QQQ ProShares (NYSE: QLD)
PS UTLRSHRT QQQ (NYSE: QID)
UltraShort S&P500 ProShares (NYSE: SDS)
UltraShort Dow30 ProShares (NYSE: DXD)
PowerShares QQQ Trust (NASDAQ: QQQQ)
Direxion Daily Small Cp Bear 3X (NYSE:TZA)
Direxion Daily Small Cp Bull 3X (NYSE:TNA)
