Technical Picture - Tech Stocks Lead Thanksgiving Rally

Weaker data in pre-market (Durable Orders -6.2% vs. consensus of -2.5%; Initial Claims 4 wk avg reaches highest level since 1983) resulted in a cautious open but the pressure was short lived as the markets held above Wednesday's low/afternoon range floor during the early dip implying limited pressure. Strength in technology/semi provided initial upside leadership and commodities, energy followed. An afternoon bounce in financials helped the S&P extend its gains for a 4th consecutive higher close.

Equities close at 1:00 PM EST tomorrow.

From oversold to overbought in just one week. Expect some consolidation soon.




$USD consolidates after 3 consecutive lower closes. Need to see some follow through (a close below Tuesday's close to confirm the retracement).

Gold looks ready to move higher after 3 consolidation days. Oil is on fire. Have been day trading some Canadian energy names in the retirement account. My favorites are CNQ, ECA, NXY, SU, TLM. Failures lead to fast moves in the opposite direction and energy is a perfect example.

Technical Picture - Support Broken

Weak data was no incentive for buyers to follow through on yesterday's late day bounce so we stalled at the 38% retracement and prices reversed (nothing new) and retested range lows. The FOMC minutes reminded us how bad things really are and provided sellers the edge into the last hour.

High level of short expiration put buying ahead of OPEX Friday.

The VIX still feels like a bear flag despite the MACD crossover. That could change if we get follow through on today's sell-off.

Technical Picture - Nebulous

The day started off on a mildly positive note with HPQ's upside guidance. But that didn't last long and by midday bears gained control, pushing prices all the way back down to last Thursday's lows. The retest precipitated another short squeeze in the final hour, but for the most part it was choppy. We closed just above yesterday's close which is short-term positive, but overall, the big picture remains nebulous.



The price action below the VIX's primary trendline, looks like a bearish flag. A break of the flag pattern would be decisively positve for stocks. We'll keep monitoring it closely.

Technical Picture - Snooze Fest (OPEX Week)

A narrow range, low volume snooze fest typical of OPEX week. The key reversal day we talked about on Thursday is all but dead. We needed to see some follow through and we didn't get any. OPEX this week and Thanksgiving next week. Hmm, could be a good time for some vacation.

The VIX looks like it wants to retest the broken trendline. Watching the MACD - will the kiss turn into a crossover?

Negative divergence of the MACD implies weakness which leads us to suspect that the bullish pennant will fail and that the $USD will eventually retrace towards its trendline.

A pullback in the dollar could kick start stocks. Commodities and gold will move higher on dollar weakness, as well as companies which do a large portion of their business abroad.

Technical Picture - Bear Trap

The bear trap breach of support was short-lived, and a high volume short squeeze resulted in a bullish engulfing hammer reversal bar. This technical head fake should take the wind out of the sails of the bear market. As you see from the intraday QQQQ chart, the bears had no momentum compared to snap back rally off the lows.

The VIX carved out a bearish engulfing bar and will retreat for the short-term. I expect the NASDAQ we'll retest last week's highs in the very short-term.

Today's action encompasses all the elements of a key reversal day.

Technical Picture - Testing October Lows

Barring a miracle, we're going lower tomorrow. Intel (INTC) out after hours lowering Q4 guidance. "Revenue is being affected by significantly weaker than expected demand in all geographies and market segments. In addition, the PC supply chain is aggressively reducing component inventories." AAPL falling in sympathy.

Technical Picture - Narrow Range Chop at Support

A gap down and early swoon into support on earnings malaise was followed by narrow range chop into midday. Shortly after lunch, a report on CNBC from BlackRock said that the $30 billion Bear Stearns mortgage portfolio is generating better cash flows than the market price implies. A quick, steep rally followed, but it was short lived, carving out a H&S top which sold off in the last hour.

Tomorrow should be interesting as we sit on support, following another relatively narrow range, low volume session. From the 15 min. chart see a wedge taking shape with positive divergence of the RSI and MACD to lower prices.




The USD broke out of its bullish pennant and looks poised to challenge resistance. Gold and energy are still consolidating in a narrow range.

Technical Picture - Gap Fade Outside Day

Today was a sellers market, buyers took a long weekend. The only positive aspect is the lack of volume which implies that the sellers were not overly enthusiastic. We are coming into an important support zone as depicted on the 60 minute chart above. Low volume consolidations usually lead to expansion.

Technical Picture - Inside Day

If the RSI can crack 50 and hold it, we'll be out of the woods, but for now it's one day at a time. Friday's NRIB on low volume is a consolidation day. We closed strong after ripping down just ahead of President Elect, Obama's press conference. So far futures are well ahead of Friday's close. I'm still optimistic.



MYGN doesn't know that we're in a bear market. It broke out of its base on high volume and is forming a bullish flag pattern on declining volume. As long as it can hold the base on a closing basis, it remains bullish. Based on the weekly timeframe, I see a prelim. target at $80.00.

Stewie has highlighted a number of bullish inverted H&S patterns.

Technical Picture - Distribution

We gapped lower on the open as day two of the corrective phase saw more broad based selling. Each pause, or attempt to rally was thwarted as sellers maintained control throughout the session. As can be seen from the charts we have retraced 62% and are approaching base support. Let's see if the bulls are going to defend support if we get that low.

Tomorrow's jobs data will set the tone for trading. However, the sell-off was, in large part, a reaction to extremely weak ADP number yesterday morning and initial claims today (not to mention hopelessly bad retail sales). When the real jobs numbers come out, we could get a sell the rumor, buy the news type reaction. In other words, after two days of selling, the bad news is priced in already. We'll see.




The USD rallied on overseas rate cuts, (150 basis pts. in the U.K). Gold retraced, no surprise.

Technical Picture - Overbought Profit Taking

Futures sold off overnight and we gapped down on the open following a very weak ADP report - nonfarm private employment declined by 157,000 in October, which is the largest decline since 2002. The real deal will be released on Friday. Notwithstanding the weak data, the market was very overbought and we were due for some profit taking. The decline was broad based, but on lighter volume. I'm watching the Fibonacci retracement levels. Thus far we've retraced 38%. I see some congestion at the 50% level.



As expected the VIX bounced at the 62% retracement level.

Gold paused at resistance and I'm not sure how the $USD will play out. The 20 MA keeps holding as support so we may be forming a bullish pennant. Too soon to tell, but I took my profit in AEM today just in case we pull back here.

Technical Picture - Election Rally - Overbought

Yesterday's NRIB led to expansion - election rally. We are now in a resistance zone and very overbought. The VIX has retraced 62% into support.


The USD and gold are on track as discussed in previous posts. Gold coming into a resistance zone.