Slow Progress in December « Market Montage

I mentioned a few weeks ago that the next 2% either way would not mean much and since then the market has been very range bound if incrementally positive.  This month the S&P 500 is up about 0.8%, with almost all of that happening Tuesday of this week.  But as you can see in the charts below we have near identical setups in the big 3 (DJIA, S&P, NASDAQ) – a very obvious "inverse head and shoulders" formation, with the market fighting to create a new higher high.   Immediately after the FOMC announcement the knee jerk reaction was "buy buy buy" which pushed these indexes (save NASDAQ) over those highs, but it did not last.

 

Ironically the Russell 2000 had been the best of the bunch, being the only index to clear it's November's highs – and of course that was the worst performer yesterday.

 

That said while the market has not been on a tear there has been very little pullback since the mid November bottom, so things were a bit short term overbought/extended by yesterday afternoon as well.   This is especially true of things relating to China (the past week) and Europe believe it or not, the latter group being very hot markets the past two or so months.  Emerging markets as a whole (China was the last to join) have also seen a lot of buying activity, so some of these areas are very overbought and need a rest of some sort.

This morning we have a nice dip in weekly jobless claims – down 29K to 343K.  These numbers are often strange this time of year with holidays so we'll see in mid January where things are more accurately.  Retail sales which was the big economic number of the week came in at +0.3% versus expected +0.5%.  One area that has been weak this week in general has been the retail stocks as a whole.  So it might point to a less than happy Christmas season despite the annual hype.  And in an economy 70% dependent on consumer spending that's an issue.  Of course they will blame the fiscal cliff talk for the retrenchment.

Bigger picture not much has changed than a week or two weeks ago other than an incremental move up in the major indexes – we need to see those levels cleared and held (not cleared and failed as yesterday) and then followed by the slope of these 50 day moving average changing from downward back to upward sloping.  The longer we stay in this area +/- 20 S&P points the better chance that begins to happen.  However, Apple continues to be an issue for the NASDAQ – showing little relative strength and as I type down another 1.6% this morning.

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