Major Indices...Macro & Mini Views

Below are a series of Daily Year-to-Date charts of the Dow 30, S&P 500, Nasdaq 100 & Russell 2000 Indices. Comments for each are provided as follows.

The Dow closed today immediately below a price resistance level of 12200 and above a confluence of a 78.6% Fibonacci fan line and a 61.8% Fibonacci arc. A close and hold above 12200 could fuel a further rally up towards 12450ish.

The S&P 500 closed today immediately below a trendline resistance level of 1265 and above a price support level of 1260. Unlike the Dow, there is major resistance above, beginning at 1270.

The Nasdaq 100 closed today immediately below a trendline resistance level of 2321 and above a price support level of 2300. There is immediate overhead major resistance above at 2340.

The Russell 2000 closed today immediately below a confluence of Fibonacci fan line and Fibonacci arc at 747.00 and above a price support level of 740.00. There is considerable resistance overhead beginning at 750.00.

The Daily Year-to-Date percentage comparison chart below of the Dow 30, S&P 500, Nasdaq 100 & Russell 2000 shows that the Dow has regained the lead in strength over the Nasdaq...the Russell has pretty much been the weakest all year.

The 1-Day 1-minute percentage comparison chart below of the 4 indices shows that strength still lies with the Dow...the Russell dipped quite a bit more this morning, but closed just ahead of the Nasdaq.

Finally, and further to my earlier post today, the 5-Day 15-minute chartgrid below of the YM, ES, NQ & TF shows today's dip and rally back above the 38.2% Fibonacci retracement level of its 5-day range. The 50 sma (red) has now also crossed below the 200 sma (pink) in a bearish Death Cross formation on the ES...the YM is the only one that hasn't yet weakened sufficiently to make this formation.

The Major Indices are preparing for a further push upwards...but are awaiting results of the ECB rate decision and press conference tomorrow morning pre-market, and, possibly, further details from the EU Summit. The resistance levels are described above...a failure to advance and hold above them with conviction could send these markets back down, once more into their large, unwieldy August trading range...I'm still mindful of the numerous unfilled gaps below, which don't fill me with great confidence for a sustained rally. Any serious pullback would have to see the Dow come on board...I'll look for any such weakening to appear in the last two charts in the days/weeks ahead.

"Euro-cozy"...

With the ECB rate decision set for pre-market tomorrow morning (see graph below, courtesy of www.forexfactory.com), and the ECB press conference to follow at 8:30 am EST, the EUR/USD forex pair is basically holding steady today in between resistance at 1.34 and support at 1.334, so far, as shown on the following Daily, 4-Hour, and 1-day 1-min percentage comparison charts...market-makers are attempting to prop up the major indices by pushing the Financials ETF, XLF up...the Commodities ETF, DBC, is the weak one again today...ones I'll be watching tomorrow morning:

After this morning's brief sell-off, the YM, ES, NQ & TF are back up and still trading in their 5-day range, as shown on the 15-min chartgrid below...my comments from my last post still apply in this regard...the 50 sma (red) has just crossed below the 200 sma (pink) on the NQ & TF in a bearish Death Cross formation...whether or not they hold remains to be seen.

"Lurch" has re-appeared...

Lurch, from TV series, The Addams Family: http://en.wikipedia.org/wiki/Lurch_(The_Addams_Family)

The best word that comes to mind to describe the market action for the past 4 days is "lurching," as depicted on the 15-min chartgrid below of the YM, ES, NQ & TF. Like the TV character, Lurch, the markets have been communicating "via simple inarticulate moans, which, much like the dialogue of Cousin Itt, his employers have no trouble understanding"...I imagine that only the market-makers understand what's been going on here...I'd be looking for a break and hold from this upward-sloping range one way or the other. It may be useful to watch the 50 (red) & 200 (pink) smas, as well, to see if they form a Death Cross pattern with the 200 sma curling down, or if price begins to move (and hold), with conviction, above both of them. They're threatening to reverse direction, but I'm not convinced yet.

I can only say that, looking at the Daily charts below, they're basically high basing and, other than the TF, made a slightly higher close today. I'm watching the lower channel line on the YM, ES & TF to see if they break and hold below. The laggard on this chart is the NQ in relation to this channel...however, the laggard in relation to current price and the 200 sma (pink) is the TF. If we see more strength come in on the NQ, no doubt, the others will move higher, as well...but the TF will have to hold its end up, too. In the meantime, I'm going to try and interpret "Lurch's" language.

The 4-day 5-minute percentage comparison chart below shows that the Financials ETF, XLF, led the attempted advances over the past 3 days...the laggards have been the Euro and the Commodities ETF, DBC...ones to also watch for any signs of renewed strength, or further weakness in order to, potentially, either confirm an advance in equities, or a reversal.

Swiss Foreign Currency Reserves Declining

Data released this morning from the Swiss National Bank shows that foreign currency reserves continued to decline in November, after spiking in September, as shown on the graph below (provided courtesy of www.forexfactory.com). Click this link for further details: http://www.forexfactory.com/#details=41362

At the moment, the EUR/USD remains locked below resistance at 1.34 and above support at 1.33 as shown on the Daily and 4-Hour charts below...we may have to see a break away (and hold) from either of these levels before we see what the equities markets have in store.

Higher Gaps on Declining Volumes...YM, ES, NQ & TF

Below are 30-minute (market hour only) charts of the YM, ES, NQ & TF. We can see a series of gaps from November 21st...I mentioned these gaps in my post of December 1st...at some point, they'll have to be filled. At the moment, price is sitting just above the 50 sma (red)...I've shown a Fibonacci retracement and Fibonacci fan lines...should price retrace from here, it could, theoretically pull back to the 38.2% retracement level, which, at the moment, lines up with the 200 sma (pink) and 50% fan line level. Declining volumes are highlighted by the red arrow.

Below is a 4-hour chart of the EUR/USD. It has failed to hold above 1.35 on its recent attempts. It's a major resistance level that will need to be re-captured and held...continuing weakness in the Euro may signal a decline coming in the U.S. equities markets.

Below is a 4-hour chart of the Commodities ETF, DBC. It  has failed to  hold above major resistance at 27.80...also an important level that will have to be re-captured and held if the equities markets are to continue advancing.

Below is a 4-hour chart of AUD/USD. A drop and hold below a major support level of 1.02 could also signal weakness for equities.

Below is a 4 -hour chart of the VIX. A rise above 30.50 could bring in large, volatile down drafts in the S&P 500.

If weakness persists in commodities and the Euro & Aussie $, I'd say the markets are looking toppy here and may be due for a pullback...or even a violent drop. At the moment, declining volumes are not confirming a further advance in equities, as the U.S. $ firms.

Also, how the markets react to this article regarding Standard & Poor's threat today to downgrade the credit rating of 15 Eurozone countries (including Germany and France) is something I'll keep in the back of my mind: http://finance.yahoo.com/news/p-puts-15-eurozone-countries-214652756.html;_ylt=Aix2m3y_uP9yg7uEq_0GZXn2uYdG;_ylu=X3oDMTQ3MW5rZHNzBG1pdANUb3AgU3RvcnkgTGlzdCAgTm8gQ29sbGVjdGlvbgRwa2cDMjgxMzUwNjktOWM4MC0zYzAwLThlODMtYTRiODc5NDEyNTBkBHBvcwMzBHNlYwN0b3Bfc3RvcnkEdmVyA2U2Yjc1NTkwLTFmOGQtMTFlMS1iN2RlLTdiMzg1MDM3YjZmOA--;_ylg=X3oDMTFrM25vcXFyBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdAMEcHQDc2VjdGlvbnMEdGVzdAM-;_ylv=3

Risky Business...

All in the name of survival:

Click link to watch video: http://www.youtube.com/watch_popup?v=Z0qGvC3vqaA

Investor Pessimism Rises in Europe

Data released pre-market today shows a further drop in the European Investor Confidence Index (a leading indicator of economic health), as shown on the graph below (graph provided courtesy of www.forexfactory.com). It has reached pessimistic levels last seen in July 2009: http://www.forexfactory.com/#details=33618

The EUR/USD is currently trading below a major resistance level of 1.35, as shown on the 4-Hour chart below...recent attempts to hold above this level have failed.

"Fat Finger" look-a-likes

Below is a Weekly chartgrid of the YM, ES, NQ & TF.

While I was studying it this morning, I noticed the May 3rd, 2010 weekly candle...it contains the infamous "Fat Finger" May 6/10 daily candle, on which the YM plunged 1025 points, the ES plunged 112.75 points, the NQ plunged 232.75 points, and the TF plunged 73.30 points.

I also noticed the August 1st, 2011 weekly candle...its range is larger than the 2010 candle on the ES & TF...and is slightly smaller on the YM & NQ.

In the case of the YM, ES & TF, there has been similar subsequent price action around a moving average on both occasions...the 50 sma (red) in 2010 and the 200 sma (pink) in 2011...the NQ has held up a bit better since it didn't touch the 200 sma. Notice how price plunged in 2011 to around the top of the 2010 candle (mid-way on the TF)...a violent re-test of this extremely volatile action (pre-planned or coincidence?). The Bollinger Bands are beginning to narrow now, as they did in 2010...price subsequently rallied in 2010...whether they rally this time remains to be seen...and it may not be as "cut & dried" as it seems.

However, I'd submit that the following levels are highly important (approximately the top of the 2010 candle) and must be held (or re-captured and held if they are violated and recent gaps filled in) if the bulls are going to make a run for higher  highs on a weekly basis...and set the stage for a convincing new bull trend. Otherwise, I'd look for more violent plunges ahead.

YM = 11000

ES = 1200

NQ = 2050

TF = 730

Also, what's different this time is the ranges on the 2011 weekly candles have been much larger following their initial plunge than the ones in 2010...no doubt a reflection of the weakness in Europe...this may continue for as long as the European debt crises remains unresolved...and it may be that price is reluctant to venture very far above the range that began in August of this year until some kind of definitive long-lasting action has been taken in Europe that would satisfy the markets once and for all. I realize that there are other global economic, financial and fiscal problems/risks which are unfolding each day, as well...so, it seems, that the bulls are taking advantage of relatively "quiet and temporarily positive" short periods of time in which to ramp up the markets...all good and well until the next catastrophic piece of news hits the fans, which seems to be happening on a regular basis.

Tracking money flow from November 25th

What gained the most in terms of percentage from the November 25th open? A look at the 6-day 10-minute percentage comparison chart below shows the following:

• XLF (Financials ETF) ended with an 8.75% gain
• SPX ended with a 6.50% gain
• AUD/USD ended with a 5.25% gain
• RTH (Retail ETF) ended with a 5.00% gain
• DBC (Commodities ETF) ended with a 3.50% gain
• AUD/CAD ended with a 2.25% gain
• EUR/USD ended with a 0.50% gain
• EUR/CAD ended with a 2.25% loss
• USD/CAD ended with a 2.75% loss
• EUR/AUD ended with a 4.50% loss

It looks like, starting from November 25th, the big buying took place in the U.S. Financials, e.g. XLF, the SPX, the Australian $, Retail, e.g. RTH, Commodities, e.g. DBC, and finally in the Canadian $. The Euro gained marginally over the U.S. $, but lost considerably against the Australian and Canadian $. The U.S. $ ended as a bigger loser than the Euro.

This is something I'll track over the next days/weeks to see if this trend continues or not. If equities are going to roll over, with money flowing back into the U.S $, I'd look for weakness to surface in XLF, RTH, DBC, and the Australian $, as well as and to a slightly lesser degree, the Canadian $...and further weakening of the Euro...it appears that the Euro may be de-coupling from the SPX (equities, in general)...something to note.

Loyalty pays...

Here is the link: http://www.youtube.com/watch_popup?v=fER-WhFUzoA

Financials' "Power Surge" Today

The Banking and Financials sectors are leading today's advance, so far, today as shown on the graph of my ETFs below.

Of interest, in the short term, will be my 4-Hour chart of XLF below...current price is in between near-term confluence of resistance and support.

The 1-day 1-minute percentage comparison chart below shows how the XLF surged ahead of the Dow 30 Index, while the credit card stocks, V and MA dropped. Today is the third gap up on the open since November 28th. How long can the buying frenzy last...or is it just short-covering after pre-market rallies? Are the circuit breakers about to trip?



The numbers people aren't talking about this morning...

Data released this morning (courtesy of www.forexfactory.com) shows that, while the unemployment rate fell in the U.S., it rose in Canada...and the average hourly earnings rate fell in the U.S. to -0.1%...a level only reached on 5 occasions since 2001. For a full view of the graphs below, here is the link: http://www.forexfactory.com/#chart=34228

Capital Spending Shrinking in Japan

Quarterly data released tonight on capital spending by businesses in Japan, showed a further drop to -9.8%, as shown on the graph below. As can be seen, spending never did get above 2006 and 2007 highs and has been steadily declining since the beginning of this year.

Data provided courtesy of www.forexfactory.com: http://www.forexfactory.com/#chart=36516

The Daily chart below of Japan's Nikkei Stock Futures Index, NKD, shows that it recently dipped below the lows made in March after the earthquake. It's currently sitting at near-term price, trendline, and moving average (50 sma) resistance. As I've written in numerous posts, it's an index that I like to watch as it moved almost identically to the YM, ES, NQ & TF for quite some time after the earthquake...although it has been weaker in October and November. It's one that I'll continue to watch to see if weakness creeps back in, or whether a major support has been established at its recent lows, from which a new bull advance can occur...the 20-day 30-minute intraday (market hours only) chart below shows, however, the same gapping scenario as noted in my last post...so, a sustainable advance above these gaps is questionable.

Brrrrr...it's drafty in here!

One thing I've witnessed over the years is that opening gaps have eventually been filled. Below is a 20-day 30-minute (market hours only) chartgrid of the YM, ES, NQ & TF.What we have here are 4 unfilled gaps on these e-mini futures indices...one gap down on November 21st, another gap down on November 23rd, a gap up on November 28th, and another gap up on November 30th. We're also left with two bear flags without the poles and two bull flags without the poles.

I don't know about you, but I don't know of any flag that can fly structurally without its pole. In my opinion, this puts into question this latest bull run up from November 28th...and, it's just a matter of time before these gaps are filled...the million dollar question is, "When?"

Springheel Jack, a fellow trader, for whom I have a great of respect, posted an article on the Financials ETF, XLF, earlier today: http://channelsandpatterns.blogspot.com/2011/12/xlf-declining-resistance.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ChannelsAndPatterns+%28channels+and+patterns%29

His post prompted me to review my own chart of XLF...below is a Daily chart...on it, I see the same 4 gaps as we have on the e-minis. Near-term resistance is 12.84 and support sits at 12.60. My above comments apply to the gaps seen here, as well...they need to be filled in to establish a credible and sustainable bull run, in my opinion. And, as Jack concluded in his post, I've also mentioned repeatedly in previous posts that the equities markets need the financials on board in order to sustain a longer-term and meaningful bull rally with conviction.