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TESTING TEMPLATE
I hope everyone had a great holiday and has started the year on the right foot. The first couple sessions have been incredible so let’s hope that the easy money period last a little while longer.
I have been pondering the future of this blog for the last couple weeks. Posting here hasn’t been as fun as it used to be and it is quite a time-consuming, thankless and incentive-less job so once the fun is gone, there is no point in sharing information anymore.
I might pick up posting daily again or the site might completely disappear as a stock market blog. We shall see.
Good luck to all!
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What a borefest! I haven’t posted as much lately simply because there is no fun in trying to comment on a market going sideways on all time-frame. We are still stuck in the range we have been in for the past 5 weeks but things may begin to stir up (or NOT!) with Nasdaq showing some leadership and closing above the trading range today. The Russell 2000 has also been outperforming over the last week or two and we are entering the phase of the month where seasonal factors kick in so we could well be breaking out within the next few days… or we could go on to continue the gap and nap pattern we have been trading in for the rest of our lives. Merry Christmas to all if the market decides to do nothing for the next few days.
Economic Data:
Tuesday: Final GDP q/q (2.8%), Existing Home Sales (6.29M), HPI m/m (0.2%), Richmond Manufacturing Index (4)
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The SPY had a minor new closing high yesterday but as shown yesterday, it looks like we are in the same range we have been trading in the last 4 weeks. Basically, you either chose to sit on your hands or shorted select stocks/indexes today to play the range the last couple days. Tomorrow is FOMC day, expect the usual treatment which normal trading into the open, then very light volume range trading leading into 2PM ET and of course the massive spike in volatility afterward. Remain patient, I doubt we will trade sideways 4 more weeks… lol
Economic Data:
Wednesday: Building Permits (0.58M), Core CPI m/m (0.2%), CPI m/m (0.4%), Current Account (-106B), Housing Starts (0.59M), FOMC Statement, Fed Funds rate
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Not much to say and I’m tired to repeat myself. Hope you are not playing indexes, there is better things to trade out there… The market is consolidating through time instead of price action. This could be a topping process or a stepping stone toward significantly higher levels. Notice that we haven’t a trend day in quite a while. When we get one might indicate the start of a move. Next week is FOMC week so trade accordingly.
Economic Data:
- Monday: Nothing
- Tuesday: PPI m/m (0.8%), Core PPI m/m (0.3%), Empire State Manufacturing Index (25.1), TIC Long-Term Purchases (50.3B), Capacity Utilization Rate (71.1%), Industrial Production m/m (0.6%), NAHB Housing Market Index (18)
- Wednesday: Building Permits (0.58M), Core CPI m/m (0.2%), CPI m/m (0.4%), Current Account (-106B), Housing Starts (0.59M), FOMC Statement, Fed Funds rate
- Thursday: Unemployment Claims (470K), Philly Fed Manufacturing Index (16.1)
- Friday: Nothing
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USD WEEKLY
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The market continues to put everyone to sleep. How many times have we seen this gap and nap trading day in the past few weeks? Not much to say except that it’s a stock picker’s game as of late and if you are playing indexes in the current environment, you must be out of your mind! The conventional belief when such sideways action occurs is that the market is coiling up for a big move. The question is of course which way. Bulls believes there is still some green shoots to smoke while bears think the prairie is on fire. Bigger levels to watch continue to remain SPY 108 and SPY 112. As far as shorter term, there is a short setup from today’s high which is a 50% fib from the highs to yesterday’s low on the ES but I wouldn’t be too aggressive with it given the current non-trending market.
Economic Data:
- Thursday: Trade Balance (-32.9B vs -37B), Unemployment Claims (474K vs 463K), Federal Budget Balance (-120B vs -136B)
- Friday: Core Retail Sales m/m (0.6%), Retail Sales m/m (0.6%), Import Prices m/m (1.2%), Prelim UoM Consumer Sentiment (68.7), Business Inventories m/m (-0.3%)
Evening reading:
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The market opened significantly lower this morning on the dollar strength and we had a non-trending day professional gap (how boring) as we held below the trading range we have been in since the beginning of the month. Let’s see if we get a test of the crucial SPY 108 level which is a gap support and the location of the 50-day moving average. For now the assumption continues to be that we are trading range bound between SPY 108 and SPY 112. Until we break out one way or another, there is absolutely nothing to do here but going long at SPY 108 and shorting at SPY 112, this has been the trade for the last 3 weeks. Holding below that SPY 108 level would cause more selling pressure and a potential pullback toward SPY 103 and hence change the short-term picture.
Economic Data:
- Wednesday: Wholesale Inventories m/m (-0.6%)
Evening Reading:
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The third failed breakout in three consecutive days occurred on Friday as a much better than expected job data was not enough to get the market to close above that stubborn SPY 112 area. Failed breakouts tend to lead to a steep countermove and we saw a steep selloff all the way down to SPY 110 before the market recovered some of the losses. This may be the sign of a topping process. However, not much has changed as we are still hovering near the rally highs and not seeing any follow-through to the downside at this point. We are also seeing notable strength in the Russell 2000 recently which could provide fuel for the market to finally break through that SPY 112 barrier which is also very close to that the widely watched 50% fib retracement. Finally, we saw a strong USD bounce and a close above the 50-day moving average so this is worth keeping an eye on as the carry trade is definitely one extremely crowded trade which could reverse in a steep manner. Weekly levels to watch remain SPY 108 (remain bullish above that level), and SPY 112 area which the market has been unable to remain above on a closing basis. My take is that we are working on getting through that area toward the ES 1150 but I don’t want any part of that until the smoke clears.
Economic Data: Little economic data next week
- Monday: Consumer Credit m/m (-9.8B)
- Tuesday: IBD/TIPP Economic Optimism (49.8)
- Wednesday: Wholesale Inventories m/m (-0.6%)
- Thursday: Trade Balance (-37B), Unemployment Claims (465K), Federal Budget Balance (-136B)
- Friday: Core Retail Sales m/m (0.6%), Retail Sales m/m (0.6%), Import Prices m/m (1.2%), Prelim UoM Consumer Sentiment (68.7), Business Inventories m/m (-0.3%)
Weekend Reading:
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The market attempted to break out to new highs and failed early on just like yesterday. We then traded sideways for most of the day until 2:50PM ET at which point broad indexes broke their range to the downside. Most of the damage was done in the financial sector and there was definitely money to be made in the inverse ETF FAZ which had a range of more than 10% today. Today’s action is somewhat bearish short-term but we are still within the context of the large trading range (SPY 108 – SPY 111.7) we have been trading in the last three weeks. Levels to watch tomorrow will be SPY 110 for a complete gap fill of Tuesday’s gap as well as your usual suspect SPY 108, SPY 109 and SPY 112. Tomorrow’s is the job report so anything can happen. IMO, there is no reason to be too aggressive when the market still is undecided. A break of SPY 108 would be very bearish while closing above SPY 112 could signal another leg higher.
Economic Data:
- Today: Unemployment Claims (457K vs 479K), Revised Nonfarm Productivity q/q (8.1% vs 8.5%), ISM Non-Manufacturing PMI (48.7 vs 51.6)
- Friday: Non-Farm Employment Change (-111K), Unemployment Rate (10.2%), Factory Orders m/m (0.2%)
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More of the endless chop today. Market attempted to break out of the range but a minor breach quickly failed around the ES 1115 level and back solidly into the trading range we have been in the last three weeks. It seems that we are correcting through time instead of price and the market may be setting up to move higher toward the 1150 area at some point so if you are playing the range trading, be aware of that. The market seems to be in wait mode for Friday’s job data with market consensus of -111K.
Economic Data:
- Today: ADP Non-Farm Employment Change (-169K vs -145K), Beige Book
- Thursday: Unemployment Claims (480K), Revised Nonfarm Productivity q/q (8.5%), ISM Non-Manufacturing PMI (51.6)
Evening Reading:
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Today marks the beginning of the last month of the decade! Seasonally, December is a bullish month on average but there is also plenty of occasions when it finished negative. Just like that, we are back at the highs after notable market strength overnight. We have been trading range bound so the smart thing to do has been been to short near SPY 111.70 and buy below SPY 109. Until we break the range one way or another, it’s as simple as that. Banks and small caps continue to stink up the place so that’s where you want to be if you choose to play the range. Friday’s jobs data is looming large and we have ADP tomorrow before the open.
Economic Data:
- Wednesday: ADP Non-Farm Employment Change (-145K), Beige Book
Evening reading:
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