Monday, December 15, 2008

For Friday, 12/12/08 And Monday, 12/15/08 - Dip Buyers Helped On Friday And As Usual Disappeared On Monday

The good news on Friday was that the dip-buyers consistently did their thing. The opening gap down following some bad news was bought, and every dip during the day was bought as well, and we went out not too far off the highs.

The bad news is that is continues to be extremely choppy trading. It is very easy to be stopped out if you don't give positions a little room. You can't trade too big or you will get in trouble very fast as this market whips around.

Despite the irritating choppiness of the action, there are some other positives in addition to the consistent dip-buying. Breadth was good, semiconductors showed some leadership, there are some promising charts developing, and I'm seeing an increase in speculative interest. Traders are being more aggressive in certain limited sectors such as infrastructure and metals. They are looking harder to find some action, and that is good, because it tends to broaden out.

It is still quite a difficult trading market, but there will be some pressure for many fund managers to try to put some gains on the books to take the sting out of an ugly year. We obviously are shrugging off the bad news, and that tells us that buyers are anxious to get something going, at least for a little while.

Since these things tend to be self-fulfilling, I would not be surprised to see the S&P 500 attack its 50-day simple moving average, which is around 910. I suspect we can take that out and get a bit more upside going, but I'm not sure that would hold for long. If the bulls are going to get things moving, next week will be their chance to go to work.

As for today, these wild swings we’ve seen recently have made it exceedingly difficult to navigate this market. Although the action was weak for most of the day, things were rather slow, but once again, we had a couple of severe swings in the final hour that took the Dow off its intraday low to the tune of about 150 point in the span of 15 minutes, back down about 100 points in the next 15 minutes and back up about 35 points in the final 3 minutes. In the end, the indices were able to finish off the worst levels of the day, but with losses of 1.37%. Breadth, meanwhile, was worse than 2:1 to the negative, and volume was quite light, which will also help exacerbate the already random action.

Despite the losses and the volatility, this market continues to be in a position to make a decent run into the end of the year. The Dow, for instance, is about 150 points from its 50 day moving average, and tomorrow’s FOMC interest rate decision as well as an earnings report from GS could very well be the catalyst that pushes us past those levels. A strong move past that important technical measure could very well bring in more buyers.

These crazy swings certainly are not supportive of a better market; and oh, by the way, now we've got this little 'ol $50 billion fraud (alleged) to contend with. What a year.

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