Technical Analysis:

  • Despite Oil (/CL) experiencing its biggest rally since March (+9%), the S&P 500 (SPX) sold off in the afternoon and into the close to finish in negative territory. 
  • Even with banks and oil companies soaring, it wasn’t enough to lift the market higher. 
  • Volume on SPDRs S&P 500 (SPY) had a strong bearish engulfing candle pattern after establishing intraday all-time highs and had above average volume for the first time since the election aftermath (11/10).
  • Despite the bearish engulfing candle pattern, there is still the potential for a bull flag pattern, though a move lower today would likely nullify the pattern. 
  • On the 30 minute chart of SPX, there exists the possibility of a double top pattern ready to confirm on a move below 2198. 
  • CBOE Market Volatility Index (VIX) showing signs of wanting to bounce for the first time since early November and prior to the election. Support appears at the 12.20 area. 
  • Money is flowing, once again, out of tech and back into banks and now into oil too. 
  • Watch the 10-day moving average on $SPX today – which hasn’t been tested since finishing 9 straight days lower. 
  • Significant sell-off on Nasdaq (QQQ) yesterday and wiping out six days worth of prior price action/gains. 
  • Following a 15-day rally on the Russell (IWM), it experienced its third straight day of selling and broke below its 10-day moving average. There is very little support underneath current price action. 
  • The last two times there was a massive +10% rally in the Russell Index in a given month, the next month led to substantial sell-offs. December though isn’t known for major sell-offs, in part due to the ‘Santa Rally’ effect. 
  • Lower highs continue to be made on the T2108 (% of stocks trading above their 40-day moving average) and has established lower-highs on each major surge to new highs that occurred in July and again in November. This should be a major concern for traders as the the highs aren’t being made on substantial breadth across the market. Typically I would expect well over 80% of stocks trading above their 40-day moving average when price is at all time highs. Right now it is at 63%.
  • With the election behind us, the market should start to turn its attention to the Federal Reserve and the eventual rate hike that will come on December 14th when the next FOMC statement is released. 
  • If it is anything like last December, it should create some jitters in the market as well as a potential selling catalyst that leads to a significant sell-off. 

My Trades:

  • Added two new trades to the portfolio yesterday. 
  • Sold PPG yesterday at $96.02 for a 1.8% loss. 
  • I will look to add 1-2 new swing-trades to the portfolio today, depending on the direction that the market decides to take today. 
  • I am currently 30% Short / 70% Cash

Chart for SPX:

SP 500 Market Analysis 12 1 16

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