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Index Wrap

Kids In Control Today... What Will Dad Say\?

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       WE 11-23         WE 11-16         WE 11-11         WE 11-02
DOW     9959.71 + 92.72  9866.99 +258.99  9608.00 +284.46  -221.63
Nasdaq  1903.19 +  4.61  1898.58 + 70.10  1828.48 + 82.75  - 23.23
S&P-100  593.27 +  5.20   588.07 + 10.08   577.99 + 18.00  -  7.99
S&P-500 1150.34 + 11.69  1138.65 + 18.34  1120.31 + 33.11  - 17.41
W5000  10596.40 +109.73 10486.67 +189.46 10297.21 +280.40  -168.72
RUT      458.42 +  7.11   451.31 + 13.21   438.10 +  5.03  -  5.58
TRAN    2534.90 + 37.53  2497.37 +176.68  2320.69 + 74.03  -   .92
VIX       24.78 -  2.39    27.17 -  1.59    28.76 -  3.64  +  1.87
VXN       50.81 -  4.23    55.04 -  3.55    58.59 -  2.60  +  4.28
TRIN       0.70             0.99             0.90             0.92
TICK       +976             +750             +784             +701
Put/Call    .61              .50              .74              .70

Kids In Control Today... What Will Dad Say?
Austin Passamonte

A heavy dose of tryptophan (naturally occurring) in leftover turkey dinners will certainly keep emotions cheery. That and all of the big-money traders enjoying a holiday break left the market action to underlings today. Bears are off enjoying vulgar amounts of profit from the past 20+ months of trading while bulls work thru the holiday trying to play catch up. As for us "market indifferent" types? It was a nothing day.

I really dislike the attitude that market players must either be bulls or bears. I've never been an extremist or single-camp type person anyway. Democrat or Republican? I'm Independent and can go either way on unbiased issues alone. Creation or Evolution? Could be some of both. Market Bull or Bear? Which way is any trend for the timeframe in question?

Honestly, I couldn't care less if the market rallies straight up for the next 20+ months or plunges to new recent lows. It is not my job to care, and doing so only adds one more emotion in between me and hyper-successful trading results. But sometimes I feel this opinion is a minority stake in the overall claim.

Almost every former biased bull analyst whose been in therapy (and some of them bread lines) since early 2000 are pumped and irrationally exuberant again. Should they be? Perhaps... it might serve them well for awhile.

(Weekly Charts: Dow and NDX)

The Dow (left chart) is walking straight up a steep ascending wedge. At the current rate it will reach 10,500 before X-mas and 11,000+ soon after that. I'll be watching for a break AND CLOSE outside of this wedge for verification of next direction. A close on the left/upper side of support would be encouraging for bulls while a break to the right/lower side of the steep pattern would spell the first sign of crabgrass in the green pastures.

Nasdaq 100 (right chart) has been trending lower within a clear channel since Jan 2001 and is on the way higher off support right now. I'm looking for resistance near the 1700 area and incredible rejection at 2,000 zone where a long-time descending trendline is earmarked for massive profit or short selling by bulls & bears alike.

(Weekly Charts: OEX & SPX)

Two views for the mirror indexes: OEX at left, SPX at right. Both were channeling downward since April with a brief foray below and quick bounce back within. The past three weeks have closed above year-long resistance and walks higher in defined incline like the Dow. Same rules apply: watch the wedges for breaks and old resistance of channel lines to serve as possible support should selling ensue ahead.

(60/30 Minute Charts: SPX)

And as a proxy for all major indexes, the SPX shows us that markets have remained sideways for some time in the latest trading range that should soon give way.

Short-term traders could have played several upside wedge breaks as one is shown above. A break above 1143 area marked by the gap from earlier this week was also a high-odds signal markets would go higher, but current overbought conditions would have many traders settling for very modest gains while the braver souls hold into Monday's return on the titans.

Speaking Of Which...
Today's light-volume half day told us nothing about next week's direction. These sessions are good for predictable day trade scalps and that's all I'd use them for myself. If it weren't the first week of December's expiration cycle I might have been tempted to play, but inflated extrinsic premiums mean lower percentage returns on capital.

Day trading weighed against spending my morning sitting in a tree watching pheasants, turkeys, ducks, geese, muskrats, mink and a host of other wildlife peruse their day in a postcard-perfect frosty morning was not even a fair comparison. Even though numerous deer thumbed their hooves at my attempts to hunt successfully were endured, it was a no-decision contest. But all incredible things must come to a temporary end and it's back to the trading station for me on Monday. Me and a host of much, much bigger players who likewise wrote this week off as mental sanity break and will begin business in earnest as well. Their kids had the house to themselves for a bit, but wait until daddy gets home and we'll see what happens next.

Summation
I expect the rally to continue churning higher for various reasons noted numerous times in the recent past. However, these markets are grossly extended based purely upon faith & hope that the worst is over and good times are ahead. Markets are indeed forward looking, but they have peered into the abyss and seen good times more than once the past two years that failed to pan out. Analysts explained away the reasons why global economics failed to turn as they predicted while markets tanked and took many people's precious dollars away in the process. Is this time finally the bottom? Is it all upward to new market highs from 9/21? Many pundits swear so, but consider the source and what they said before. Caution is key when climbing extension ladders leaning so steep against a tree. One strong gust of wind can change things in a big hurry. Don't let your safety line grow too slack!

Best Trading Wishes,

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