Tuesday’s Trading – 12/1/09

SPX Moving Average Convergence
The 20, 50, and 100-period moving averages on the SPX’s 60-minute chart are all converging at about 1099. That will be strong resistance. If the SPX is indeed able to punch through it, it will need to at least run up and tag 1112. If it turns down before doing so, that will be a hint that it is might eventually fall out of its rectangular trading range.

The Dubai Gap
The XLF is the only major ETF that has closed its Dubai Gap (from Friday morning) so far.

Monday’s Trading – 11/30/09

The Fractal Dimension Index
I have posted a page on the Fractal Dimension Index. It has more examples, explanation, and links. Make sure to look at the Apple chart, as AAPL looks poised to make a move. And my FDI indicator is ready if you use TradeStation.

Fabulous Recovery
ShopperTrak reports a rather lame 0.5% increase in Black Friday sales over last year. Does that strike you as fabulous?

Re: Thanksgiving Panic
If you are thinking that the Thanksgiving Panic in the futures was a fluke, you might be mistaken. Here is a Benoit Mandelbrot quote:

“Price swings are highly erratic. The large ones are numerous and cluster together.”

And Mandelbrot’s second rule of markets: “Trouble runs in streaks.”

SPX Rectangle

George posted a couple of chart’s recently showing the market’s sideways trading range. And I think a rectangle pattern is the correct interpretation of the trading over the last three weeks. Here is an hourly SPX chart (click to enlarge):

SPX Rectangle - 11-29-09

The blue box gives the height of the rectangle. A breakout or breakdown should move the same number of points. So, the green line shows the bullish resolution up in the 1140 area, and the red line shows the bearish resolution down around 1057.

The purple box shows the November 9th gap. In the event of a move down, that gap would likely provide support, even if only temporary.

Since the futures have already probed down to 1067, I’m expecting a bearish resolution. Further support for that expectation is that the IWM is now well below its November 9th gap.

Bulls can pin their hopes upon the fact that the QQQQ bounced off the top of its November 9th gap on Friday morning.

Dubai Doubts

Did Dubai really crash world markets?

Here’s David Faber reporting the Dubai story on Wednesday morning:

The market yawned and rallied into the close. The futures didn’t roll over until four hours after the bell. Yes, Faber’s delivery style does indeed induce yawns, but bulls should be concerned that it wasn’t just Dubai that caused the panic.

Also, the market’s seemingly miracle recovery after the futures had plunged on Thanksgiving may only be a retracement. That’s what happened last year. On October 23, 2008 the futures market was shut down at 843 after the SPX futures dropped 60 points. (So, if you went to sleep long only one ES contract, you woke up $3,000 poorer.) But the stock market seemed to shrug it off the next morning and closed at 876.77. The bulls were greatly relieved over the weekend, but on Monday, the SPX went down and tested the lows that the futures had established.

The lows held, and the market rallied for a week or so before rolling over and plunging much lower in November 2008.

We’ve seen this movie before, and bulls should not take it for granted that the panic is over. The 1067 low set by the futures should be considered a price probe until proven otherwise.

Friday’s Trading – 11/27/09

Take That!
On Monday night, I wrote: “Perhaps the market wants to range between 1085 and 1111 for a while.” And since then, the futures have ranged between 1082.75 and 1111.25. How about that? (Note: I had to type this fast because the futes are threatening to blow out the bottom of my range.) Also, while everybody was waiting for the SPX to hit the 50% retracement of the bear market at 1121, it was the 1111.82 level of the Box of Beer that capped this leg of the rally. And back here, I lectured the “Fast Money” Traders who proclaimed that they “didn’t get” why T-Bill yields went negative. Maybe they get it now that Dubai has blown up, and Vietnam has a currency crisis (thanks for the link, Larry). And did you hear anybody on Fast Money calling SKF a keeper like George did here? Hah! Take that Fast Money!