Market Internals

Introduction

The Nasdaq Composite had been a laggard in reaching its round-number level. The Dow, SPX and OEX all achieved their respective round-number targets last week or the week before, in the case of the OEX's 800 level. The Nasdaq Composite almost got there on Friday, reaching an intraday high of 3,991.66. However, not until this morning did the Nasdaq Composite finally ring that 4,000 bell. It was not fated to hold that 4,000 level into the close, however. The Nasdaq Composite closed the day at 3,994.57, off its 4007.09 high of the day.

Many global bourses responded favorably overnight and today to geopolitical news concerning Iran. This weekend, Iran accepted what is being described as an initial six-month step to halt its progress toward obtaining a nuclear weapon. This acceptance came at the urging of the P5+1 group: the United States, the United Kingdom, Germany, France, Russia and China, with the European Union working as a facilitator. The P5+1 makes it clear that this six-month first-step program is just that: a first step and not an "acceptable end state."

In return for its acceptance of the various conditions, Iran will receive relief that the P5+1 group describes as "temporary, targeted, and reversible," with most sanctions remaining in place. If Iran fails to meet the requirements, the P5+1 group asserts that the temporary relief will be revoked and additional sanctions imposed.

What are those conditions? As part of the agreement, Iran can no longer claim that the United Nations Security Council's resolutions directed at Iran's nuclear enrichment program are illegal, and those resolutions must be addressed. Iran must also comply with the Non-Proliferation Treaty.

Particulars also include Iran's commitment to halt enrichment above 5 percent and dilute its stockpile of near-20 percent enriched uranium to below 5 percent. Iran cannot construct additional enrichment facilities, including adding additional centrifuges, or installing or adding next-generation centrifuges. It can add centrifuges only to replace damaged machines. The country must leave half of the installed centrifuges at Natanz and three-quarters of installed centrifuges at Fordow inoperable.

Iran promised that it would not increase its stockpile of 3.5-percent low-enriched uranium, instead converting newly enriched 3.5-percent uranium to oxide. Iran also committed to several steps that will ensure no further advances at Arak or in the country's plutonium track. Iran further agreed to provide design information and access to more frequent inspections for the Arak reactor, daily access to IAEA inspectors at Natanz and Fordow, and other key access and information. IAEA will be the agency verifying many of these steps, working with a Joint Commission of the P5+1 group.

The relief offered as a result of this commitment will be limited, with the "vast bulk of . . . sanctions" remaining in place. However, some sanctions on Iran's auto sector, petrochemical exports and gold and precious metals will be suspended, among other changes. Purchases of Iranian oil can remain at their current levels, levels called "significantly reduced," with $4.2 billion from those sales allowed to be transferred in installments, only if and as Iran meets the commitments. Iran will still be dealing with substantial lowering of possible revenue and still will be pressured to meet these and further obligations, the P5+1 countries claim. Economic pressure on the country will be maintained, the P5+1 countries want Iran to know.

Most of Iran's $100 billion in foreign exchange holdings are still restricted or inaccessible under this agreement, and access to the U.S. financial system is still restricted. For the U.S. in particular, prior restrictions on trade still remain in effect.

Humanitarian transactions have always been exempted by our Congress, so this agreement will not include new funds for humanitarian transactions. However, the agreement does allow for facilitation of those humanitarian transactions. These would include food, medicine, medical devices, and agricultural commodities, among others.

This agreement will not be without controversy. The proponents claim that it stops the addition of additional centrifuges, the fueling and commissioning of the Arak heavy water reactor, and the further stockpiling of enriched uranium. It avoids a collapse of the coalition because it represents progress, and it allows for hope of a peaceful resolution.

The Iranian public greeted their returning negotiators with cheering crowds. In the U.S., the reception proved mixed, with some expressing skepticism that Iran would meet the parameters set out. Republicans in Congress and Israel's Prime Minister Benjamin Netanyahu deride the agreement, calling it a "very dangerous" and "historic mistake," respectively. Republicans and some skeptical Democrats, also, do appear to be resigned to the accord for now, but Israel's Deputy Defense Minister Danny Danon vowed that Israel still retains the option of defending itself "by any means necessary." Some experts question, however, whether Israel will be as willing to act by itself during the next six months when a strong coalition has formulated this first step. U.S. Secretary of State Kerry reassured Israel that the ultimate goals of both the United States and Israel remain the same. Proponents of the deal point out that no progress was possible unless Iran agreed to come to the bargaining table, a task which this agreement accomplished.

While Iran may be looking at a "temporary, targeted and reversible" lifting of some sanctions, North Korea may be faced with the opposite, the U.S. special representative for North Korean policy said today. This official, Glyn Davies, vowed that if North Korea did not reengage in the stalled six-party talks and also back up such talks with actions demonstrating some "sincerity," negotiators would have to increase the pressure on North Korea to participate in the process. Some commentators think he hinted that tactics to increase that pressure might include more sanctions.

While many foreign bourses posted gains, most major U.S. indices spun their wheels today, with price action producing small gains or small losses. Almost all closed off their highs of the day, however. The SPX dropped 0.13 percent; the Dow gained 0.05 percent; and the NDX gained 0.16 percent. The Nasdaq Composite gained 0.07 percent. The RUT eased 0.02 percent, and the SOX, 0.12 percent.

Some energy and metals commodity prices dipped this morning, but most steadied by the close and some even gained. Gold (/GC) futures for December delivery settled at 1244.10, up 0.5. Volume was lighter than Friday's. Silver futures (/SI) for December delivery settled at 19.862, down -0.072, also on volume lighter than Friday's. Copper futures (/HG) for December delivery settled at 3.2140, up 0.225.

WTI crude futures settled at $94.09/bbl, down $0.75. A Societe Generale analyst opined that the Iran agreement won't change long-term pricing on the oil products. That analyst believes that Saudi Arabia will likely trim its output to stabilize prices.

Monday's Developments

Asian bourses were mixed. Japan is a major oil importer and reacted positively to lowered oil futures as a result of the Iran deal. The Nikkei 225 gained 1.54 percent, the Hang Seng lost percent, and the Straits Times gained 0.25 percent. China's Shanghai Composite dropped 0.47 percent.

Last night, an ECB executive board member, Benoit Coeure, warned that disinflation--a decline in inflation--could persist for a time, but countered that by saying that he didn't believe deflation would occur. Another ECB member, Christian Noyer, said that the ECB could lower rates again to ensure that deflation doesn't occur. Both were speaking in Tokyo.

Most European bourses climbed. The FTSE 100 gained 0.30 percent; the DAX, 0.88 percent; and the CAC 40, 0.55 percent. Spain's IBEX 35 gained 0.12 percent, but Italy's FTSE MIB lost 0.20 percent.

Today's U.S. economic release schedule began with the November Markit Composite PMI. This is not the more closely watched ISM PMI, but it also uses the 50 level as a contraction/expansion benchmark to measure composite manufacturing and service sector data. The Markit survey composite number rose to 57.1 from the prior month's 49.6. New orders rose to 57.9 from the prior 53.9.

When the services sector was isolated, the PMI rose to 57.1 from the prior 49.3. Markit also breaks out new businesses in the service sector, and that PMI rose to 58.5 from the prior 54.2. Most of these numbers were the best seen in eight months and some, the best since April 2012. However, unlike the Moody's weekly Business Confidence Survey, which lately shows increasing optimism six months out, Markit reports that businesses are concerned about how the debt ceiling will impact their businesses next year.

U.S. economic and other releases also included the referenced Moody's weekly Business Confidence. Business confidence rose to 28.7 from the prior 26.8. The firm described businesses as "feeling good." It reiterated the degree of confidence businesses feel about early next year, and says, for the first time since I've been covering this report, that "[e]ven hiring intentions have taken on a brighter hue."

Today, the National Association of Realtors (NAR) released the latest Pending Home Sales. This October summary did not contain such glowing news since it reported the fifth consecutive monthly decline. As a reminder, this number tends to be more forward-looking than Existing Home Sales, released last week, and it tends to be market moving.

Industry experts had expected a rise of 2.2 percent after the prior drop of 5.6 percent, but the headline number instead fell 0.6 percent. The index is 1.6 percent lower than the year-ago level and at its lowest level since December 2012. The good news in that result, however, was that the prior number was revised higher to a drop of only 4.6 percent rather than 5.6 percent.

The NAR's chief economist said the weakness was expected since the government shutdown caused delays, especially in IRS income verification for mortgage approval. Limited inventory and affordability concerns also impact the number. Job creation and an easing of particularly stringent mortgage underwriting standards would help offset those limiting factors, he said, but he warned that new mortgage rules to be implemented in January could delay approvals. He also warned of the deleterious effect of another government shutdown, both to housing approvals in particular and the economy in general.

Regionally, the Midwest and Northeast saw gains in pending home sales, while the South and West saw declines. The Midwest and Northeast gained 1.2 and 2.8 percent, respectively. The South and West declined 0.8 and 4.1 percent, respectively.

The Dallas Fed Manufacturing Survey for November revealed a third consecutive month of gains. Production rose to 16.9 from the prior 13.3. New orders, capacity utilization, and shipments showed strength, with capacity utilization the strongest seen since March, 2011. Labor market indicators demonstrated that workweeks were longer and employment growth remained positive, if edging down from its prior rate of growth. Upward pressures remained on prices and wages, except that the wages and benefits index eased to a lower positive number. Businesses were optimistic about future business conditions.

In addition, the Federal Reserve Bank of Philadelphia's results of a survey of economic forecasters today resulted in a lowering of the estimate of the U.S. GDP for the fourth quarter to 1.8 percent. The Philly Fed characterized the projections as "nearly the same as those of three months ago," but the prior estimate had been 2.3 percent. Growth for the next quarter is expected to rise to 2.5 percent and then to 2.9 percent in the second quarter of next year. The dollar appeared to decline and equities to bounce about the time the pending home sales and the Philly Fed's lowered estimate were released, perhaps in hopes of continued asset buying.

The report offered good news relating to unemployment and jobs. Projections for unemployment were lower than the prior projections, at 7.5 percent in 2013, 7.0 percent in 2014, 6.4 percent in 2015, and 6.0 percent in 2016. Forecasters predict higher growth in jobs, with nonfarm payroll employment adding 187,300 jobs per month this quarter and a few less--187,000 per month--next quarter. For 2013, they project growth of 181,900 per month, and for 2014, 189,900 per month.

Story stocks include Fiat, majority owner of Chrysler Group LLC. News sources variously reported this morning that Chrysler Group LLC was moving forward with plans to complete its IPO by the middle of December and that the company had decided against an IPO date this year. Reuters reported that the IPO could be priced as early as this week, with the intention to raise $1.5-2.0 billion, but when the news settled, it appeared that the report that Chrysler will not be completing the IPO this year was the correct one. Instead, the company will go forward with plans to offer the stock in the first quarter of next year. The CEO of both Fiat and Chrysler hasn't liked the IPO pricing so far. He reportedly wants to buy the shares owned by UAW union trust fund and combine the two companies rather than see the IPO go forward.

CME Group Inc. (CME, 82.29, down 1.56 or 1.86 percent) responded to complaints from brokers about its plan to raise fees for those who distribute its data and for transactions. CME said that it might consider minor changes to its fee-raising plan, but that the plan would otherwise go forward. Brokers complained that the increased fees would cut down on the number of futures traders and transactions. Part of the new fees--those for distributing data--have already rolled out for new users, while existing users have in some cases been able to qualify for a waiver until 2015.

Boeing Company (BA, 133.08, down 2.89 or 2.13 percent) dropped today. The company had this weekend warned airlines that 787s with the General Electric (GE, 26.73, down 0.35 or 1.29 percent) engines might have icing problems and should avoid thunderstorms.

Apple (AAPL, 523.74, up 3.94 or 0.76 percent) announced its acquisition of Israel-based 3-D sensor company, PrimeSense. The deal was completed after months of negotiations.

Offshore drilling services company SeaDrill Limited (SDRL, 42.46, down 2.78 or 6.15 percent) reported earnings of $0.61/share on revenues of $1.28 billion. The company disappointed on EPS and met expectations on revenue. The company also announced an increase of $0.04 in the quarterly cash dividend, raising that dividend to $0.95 per share. The company announced other metrics, too, but investors weren't liking what the company reported.

Chairman Yuzhu Shi and an affiliate of Baring Private Equity Asia have offered Giant Interactive Group, Inc. (GA, 11.41, up 1.28 or 12.64 percent), a developer and operator of online games in the Peoples Republic of China, $11.75 per American Depository Share to take the company private. This was a 16-percent premium to the company's closing price on Friday.

Uni-Pixel, Inc. (UNXL, 12.25, down 1.79 or 12.75 percent) provides performance-engineered films to flexible electronics market segments, touch screens, and displays in the U.S., as well as hard coat, finger-print resistant cover films for touch-enabled devices. Today UNXL reported that the SEC has issued subpoenas related to agreements concerning its InTouch Sensors. The SEC said, as it likely always does, that the inquiry is not an indication of any violation of laws or a negative opinion about any security, person or entity.

Facebook (FB, 44.82, down 1.41 or 3.05 percent) declined. Some pundits pointed to weakness in other momentum stocks such as YELP (58.20, down 4.19 or 6.72 percent) and LNKD (216.62, down 3.63 or 1.65 percent) as a reason for the decline. Others pointed to a Harris Poll that indicated privacy concerns were stronger among younger people using Facebook than among those over 45. Facebook has been the subject of privacy concerns.

Anheuser-Busch Inbev SA/NV (BUD, 102.40, down 0.96 or 0.93 percent) dropped today. This was perhaps in response to a downgrade by a Societe Generale analyst and another by Nomura analysts.

Nuance Communications (NUAN, 15.99, down 0.38 or 2.32 percent) zoomed higher in after-hours trading after announcing earnings but then it dropped. It was last down an additional 0.60 or 3.75 percent off the closing price as this report was prepared. The company reported earnings of $0.30 per share against expectations of $0.29. It reported revenue of $490.4 million against expectations of $489.56 million. Earnings per share for the next quarter may be below consensus, although sources were not certain that the figure provided compared to the prior consensus.

Network security platform Palo Alto Networks (PANW, 46.10, up 0.80 or 1.77 percent) was last up a further 2.90 or 6.29 percent above the closing value. The company reported $0.08 per share on revenue of $128.2 million. Consensus had been $0.07 on $120.8 million.

Let's look at weekly charts. It was time last week for indices to retest the support of their daily 9-ema's or even the lower boundary of their smallest Keltner channels. Most retested the 9-ema support at least before rebounding.

Charts

Those new to my Monday Wraps might find the following paragraphs useful when interpreting my charts. Those who have read the Wraps can skip straight to the charts. I set up nested Keltner channels on my charts. It's a run-of-the-mill channeling system like the more familiar Bollinger Bands. As with those more familiar BB's, channel boundaries are often targets for upside or downside moves. They also mark levels where prices might find support or resistance on closes. When several channel lines converge, that potential resistance or support might appear stronger, just as it would if 20-, 50- and 100-sma's all converge in one spot.

For the benefit of subscribers, I mark potential upside and downside target/support/resistance levels with rectangles, usually green for upside and red for downside. Orange rectangles are sometimes used when the darker-colored ones would not allow for a clear examination of the next target. From now on, I will mention the nearest potential support or resistance level in the discussion on the chart, but not the further-out ones. They can be located on the charts if price breaks through the nearest levels on consistent daily closes. If an interpretation such as "support levels appear stronger than resistance, so up looks more likely than down" is possible, I'll tell you. Often we traders must be able to defend our trade against a move in either direction.

As with any type of potential support or resistance, those with profits should be protective of those profits as support or resistance is tested. If prices find support and climb, look to the next higher rectangle, even one just broken through, as potential resistance. Do the reverse when resistance is breached. Hopefully, this format provides you with the information you need without requiring all night to read as happens when I list each potential support or resistance level individually.

Annotated Daily Chart of the SPX:

Last week, the SPX's retest of 9-ema support was a positive one. That support held on daily closes at or above the (red) 9-ema, and the SPX bounced up into a new high. In doing so, the SPX is once again challenging potential resistance on daily closes, resistance that extends up to about 1,812 on daily closes. Consistent daily closes above about 1,812 would indicate that the SPX was again in a momentum run. The SPX also has met all targets displayed on the weekly chart, so it's as overextended there as it is on the daily chart. Still, we have to acknowledge that prices can run higher far longer than it appears that they should.

As long as daily closes are sustained at or above the rising red 9-ema, the SPX is maintaining its strongest rally pattern. If the SPX should pull back, those in short-term bearish positions should certainly have profit-protecting plans in place whenever the 9-ema is retested until that pattern is broken.

If the SPX maintains closes below about 1,790, however, it targets the lower boundary of its smallest Keltner channel and the top of its former rising regression channel, where potential support converges. Even a drop to 1,767-1,781 that is followed by a steading and then a sharp climb back above the 9-ema maintains the bullish tenor.

Sustained daily closes below about 1,767 would be more serious, however. If that should happen, lower potential targets are marked, with Keltner targets coinciding with the midline and then the bottom of the former rising regression channel. In the past, I have detailed each target zone, including those that are unlikely to be reached in a single week. Doing that lengthens the report too much, and today's Iran report has already lengthened it. The other targets are marked on the chart, but unless readers object, I'll just detail the closest ones with the understanding that other potential targets are marked in case the nearby ones are exceeded.

Annotated Daily Chart of the Dow:

Last week, the Dow also maintained its daily closes at or above a rising red 9-ema, so it's also maintaining its strongest rally pattern. The Dow, however, does have a further potential upside target, from about 16,185-16,315. As long as the Dow is maintaining daily closes above about 16,000, that potential target would remain in place.

However, the Dow is long overdue for a drop to the bottom of its smallest Keltner channel, just in the course of normal rally behavior. It hasn't touched the bottom of that channel since it was trading near 14,800, a long time back. Consistent closes below about 15,900 would suggest that it's time for the Dow to drop to the bottom of that channel and retest it, with that potential support likely located somewhere between 15,750-15,850 if it was tested before the end of this week.

If the Dow should drop that low but then bounce and soon make it back above its 9-ema, the rally pattern is preserved. If the Dow falls through that support or else rolls over again after a red 9-ema retest, the rally pattern is thrown into question. Lower potential targets are marked on the chart, if this should happen.

Annotated Daily Chart of the NDX:

The NDX is again climbing along the upper boundary of the automatically drawn rising regression channel, an upper boundary that is theoretically resistance. Potential Keltner resistance converges with that regression channel resistance. It's not until the NDX consistently closes above about 3,455 that we can assume it's pulling free of the resistance and moving into momentum mode. Even on the weekly chart, the NDX has butted up against potentially strong resistance with no further potential upside targets marked.

The NDX isn't currently responsive to the red 9-ema. When the NDX starts churning across the 9-ema as it's been doing, it sometimes next dips down to the support configuration that's now located at about 3,315-3,356, but that support configuration could be pushed lower to 3,300-3,345 on a sharp downdraft. Sustained closes below about 3,315 or maybe 3,300 would be needed to change the tenor of the trading for the past few months and suggest a drop through the lower half of the rising regression channel toward the next marked target. A drop to and bounce from 3,300-3,345 keeps the NDX in the upper, more bullish half of the rising regression channel.

Annotated Daily Chart of the RUT:

The RUT often is responsive to the red 9-ema. However, lately, like the NDX, it's been chopping back and forth across that moving average. The RUT's action has been flattening that moving average a bit, without the closes above or below being particularly predictive of next direction. Now, however, the red 9-ema aligns with the midline of the RUT's rising regression channel, so it may be a bit more predictive.

The RUT is now approaching its next potential Keltner target from about 1,129-1,141, with presumed resistance on daily closes to be found in that zone. As long as the RUT remains in the upper half of its rising regression channel, with closes at or above about 1,108-1,116, it maintains that potential upside target.

Sustained closes below about 1,108, however, target the 1,087-1,098 zone. Sustained daily closes beneath about 1,087 suggest that the RUT may fall through the rest of the rising regression channel, perhaps even falling a bit lower, to the potential Keltner support from about 1,048-1,057.

Annotated Daily Chart of the VIX:

The VIX lingers at or above support. Last week's climb was reversed at the top of the marked short-term descending trendline. The VIX would need to break out above that trendline before there would be any confirmed change in trend, even over the short-term period. As stated previously, the VIX is not always a good market-timing tool, and we have gone through periods when the VIX stayed low--even lower than it is now--for weeks, months or even years. However, the VIX bears watching since it is also a level from which it often reverses, with equities rolling down while the VIX breaks out to the upside.

Tomorrow's Economic and Earnings Releases

This week's important economic events are carried forward from Jim Brown's weekend Wrap.

Reporting companies tomorrow include Hewlett-Packard (HPQ), among others. The company reports after the close. To see the entire reporting schedule tomorrow, go to this link.

What about Tomorrow?

Because of the volatile moves, I had lately switched to using 60-minute charts to avoid some of the noise. Today we'll move back to the 30-minute charts. The daily charts above provide us with an overview and a context from which to view these intraday charts. We know from the daily charts that there was some indecision today. These intraday charts tell us more about what might happen over the course of the next day or so, rather than the next week or so.

Annotated 30-Minute Chart of the SPX:

Since last Thursday, the SPX had been finding support on a climbing red 9-ema on the 30-minute chart. As long as the SPX was bouncing from tests of a sharply rising 9-ema, there was no change in tenor. Late this afternoon, the SPX dropped through that moving average, straight to the bottom of its smallest Keltner channel. In doing so, it set a potential short-term target from about 1,798-1,801 and then set about approaching that, too. Sustained 30-minute closes beneath 1,798 would set a next near-term downside target from about 1,789-1793. That's a must-hold level to maintain the SPX's recent pattern. A failure there risks a decline to the bottom target on the chart.

If the SPX musters support on 30-minute closes at either the nearest red rectangle or the must-hold level and bounces, watch for potentially strong resistance at the red 9-ema, wherever it might be at the time it's tested. If it's tested first thing tomorrow morning, it's likely to be somewhere near 1,803 or slightly lower.

Annotated 30-Minute Chart of the Dow:

The Dow had also been maintaining 30-minute closes at or above a sharply rising red 9-ema until late this afternoon. Then it dropped through that support all the way to the bottom of its smallest (grey) Keltner channel. As long as its sustaining 30-minute closes beneath its red 9-ema and particularly as long as those closes are below about 16,066, it sets a potential downside target near 16,015-16,040. A failure to hold support above about 16,015 suggests a potential downside target near 15,945-15,972. That's a must-hold level for the Dow to preserve its recent pattern, not just the pattern over the last few days. A lower potential downside target is marked in case that happens.

The last 30-minute candle showed some end-of-day buying. If the Dow now bounces instead of drops, the turning-lower red 9-ema might offer resistance on 30-minute closes. It's likely to be somewhere in the 16,066-16,102 range if it is tested first thing tomorrow morning. Resistance is likely to be strong in that range, but if the Dow can move above it or gap above it tomorrow, a next upside target is found just above, at the highest marked rectangle.

Annotated 30-Minute Chart of the NDX:

As happened with the other indices, the NDX broke its shortest-term pattern, producing at least two 30-minute closes beneath its red 9-ema and pushing down to test the lower boundary of its smallest (grey) Keltner channel. Sustained 30-minute closes beneath about 3,424 would set a new short-term downside target near 3,412-3,417. A failure to find support there on 30-minute closes would suggest a next downside target from about 3,393-3,403. That's a must-hold zone for 30-minute closes or the recent pattern, not that of just the last few days, will be undone and the lowest marked target set.

If the NDX bounces first thing tomorrow, resistance is likely to be strong all the way up to about 3,434 unless the NDX gaps above it tomorrow. Sustained 30-minute closes above about 3,434, however, set a potential upside target near 3450, marked on the chart.

Annotated 30-Minute Chart of the Russell 2000:

Like the other indices, the RUT broke out of its pattern of closes at or above the 30-minute red 9-ema by the end of the day. The RUT, too, fell all the way to the bottom of its smallest-grey Keltner channel. It appeared to set a new potential downside target from about 1,119-1,121, although a gap above or strong drive back above the red 9-ema first thing tomorrow morning would question that new short-term downside target. The RUT has thickly converging resistance, however, all the way up to today's intraday high, and would need to sustain 30-minute closes above that intraday high before there could be any confidence that it was breaking free of resistance.

If the RUT instead drops all the way to 1,119-1,121 and then bounces, watch for potentially strong resistance at the retest of the red 9-ema, wherever it might be at the time, or at that thickly converging resistance already marked on the chart. If the RUT breaks below 1,119 on sustained 30-minute closes, it sets another short-term downside target near 1,112-1,115. That's a must-hold level to avoid setting the much lower potential downside target near 1090-1100, marked on the chart.

What happens first thing tomorrow? Should we rely on chart evidence or the traditional end-of-the-month and Thanksgiving-week typically bullish buying patterns when we're making our decisions this week? Certainly we know of those patterns, and some buyers will be waiting to jump in on any pullbacks. However, we're also aware that the SPX comes into this week with seven weeks of gains behind it and a presumed need to take a breather. Most indices produced candles indicative of indecision today. Several have outrun all typical upside targets.

I never rely on seasonal patterns playing out, but that doesn't mean I ignore them. I try to use the levels I see on these charts to help me decide if I see this behavior, then that pattern might be a) working as expected or b) failing.

We may get an idea right away tomorrow morning. Most short-term charts show setups for at least small declines, either immediately or after a resistance retest. If such declines occur and are strongly bought, driving prices back above 30-minute 9-ema's, we'll know that buyers are indeed willing to step in and we'll watch how the next resistance test plays out. We'll know the same thing if indices gap above marked resistance and hold steady for the first hour or so. We'll know something entirely different if the indices drop heavily to or through the next downside targets and can't soon bounce.

Linda Piazza