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Yesterday had the first major sell off as the market consolidated at its highs. Essentially, the S & P 500 has traded sideways since December 12th. The S & P 500 ended up closing 18.96 points to the downside, at 2,249.92.
As we move towards year end, the question is whether this is just a normal pullback or the start of something bigger.? Something bigger implying a bear market.
I don?t think this is the start of a larger bear type correction for a few reasons.
The first is that with slow trading this week, markets can be moved around.? In fact, yesterday?s volume was still well below average.? And second, after making new highs, markets will tend to make a retest of the high before they fail.
With only two trading days left in 2016, the monthly price for December has had a range of 90 points.? The high is 2,277.53 and the low is 2,187.44.? The midpoint is 2,232.44.
Even with yesterday?s sell off, price is still trading above the projected midpoint of the monthly bar.? A close under 2,232.44 would be bearish.
And speaking of monthly price bars, the upper bands should still be monitored.? For the S & P 500, the upper band is 2,276.02.? The high slightly breached that level by about a point.
For the DOW, the upper band is 19,743.94.? The high for December is 19,987.63, so it cleared the upper band by about 230 points.? Even with yesterday?s sell off, the DOW closed at 19,833.68 or almost 100 points above the upper band.? A close back under the upper band would be bearish.
For the NASD Composite, the upper band is 5,502.92. The high for the month has been 5,512.37, or slightly above the upper band. The close yesterday was 5,438.56. So price is back under the upper band.
The upper band levels need to be monitored. As you know, they set up price expectations based on whether price can close above them or fail.
The divergence between the S &P 500 and VIX for two days set up the sell off yesterday.
It is not always true that the market turns the very next day, but it is usually a warning that a turn is coming.
That divergence and the fact that the VIX is at all times lows has kept us on alert.
Narrow range trading continues and I expect that action until after the new year.
Continue to monitor the levels for entry points.
Here are the Key Levels for the Markets:
$VIX:
Major level ? 14.06
Minor level ? 13.67
Minor level ? 12.89
Major level - 12.50 **
Minor level ? 12.11
Minor level ? 11.33
Major level ? 10.94
Major level ?? 9.38
I would have expected that the VIX would fail at 12.50.? The fact that it got through 12.50 on its first drive suggested it should head higher.? The VIX pulled back to 12.18 after getting through 12.50 and headed higher.
At that time the S & P 500 rallied to 2,263.10 before selling off the balance of the day to close at 2,249.92.
The VIX should attempt a run to 14.06.? Having said that, 13.28 is a minor resistance level.? If it clears 13.28, it should run to 14.06.? If it can?t, expect it to pullback.
As you know, the S & P 500 will run opposite the VIX.
$SPX:
Major level ? 2,281.30 **
Minor level ? 2,273.48
Minor level ? 2,257.82
Major level - 2,250.00 ***
Minor level - 2,242.18
Minor level - 2,226.62
Major level - 2,218.80
After stalling right at the minor 2,273.48 on Tuesday, the S & P 500 dropped to the major 2,250 level.
A test of 2,242.18 is probable and I would expect support there.? Also, minor support is at 2,246.10.
The S & P 500 is oversold short term.
QQQ:?
Major level - 121.88
Minor level - 121.10
Minor level - 119.53 ***
Major level - 118.75 ***
Minor level - 117.97
Minor level - 116.41
Major level - 115.63
Minor level - 114.84
The QQQ closed at 119.88.? 118.75 should offer support, if it drops under 119.53.? A close today under 119.92 would confirm a move down to 118.75.
TLT:?
Major level ? 125.00
Minor level ? 124.22
Minor level ? 122.66
Major level ? 121.88
Minor level ? 121.09
Minor level ? 119.53
Major level ? 118.75 *
Minor level -? 117.96 **
Minor level ? 116.41
Major level ? 115.62
The TLT continues to bounce from its oversold condition.? It closed at 118.53, just under the 118.75 level.
119.14 should be minor resistance.
Multiple timeframes remain bearish.
GLD: ?
Minor level: 113.28
Major level: 112.50
Minor level: 111.72
Minor level: 110.16
Major level: 109.38 **
Major level: 106.25
Major level: 103.13
Major level: 100.00
Like the TLT, the GLD continued to bounce from its oversold condition. It closed at 108.86.? 109.38 should be resistance.
If the GLD takes out 109.38, I would expect 112.50 to be major resistance.
XLE:
Major level ? 78.13
Minor level ? 76.56 **
Minor level ? 75.78 **
Major level - 75.00
Minor level - 74.22
Minor level - 72.66
Major level - 71.88
Minor level - 71.10
Minor level - 69.53
The XLE closed just under the minor 75.78 level, at 75.69.? I would expect a retest of 75 and that level to offer support.
I would not expect the XLE to drop further than 71.88.
Look to see if the XLE firms up around the 73.50 to 74.50 area.
FXY:
Minor level: 87.11
Minor level: 86.33
Major level: 85.94
Minor level: 85.55
Minor level: 84.77
Major level: 84.38
Major level: 82.81
Minor level: 81.64
Major level: 81.25 **
Major level: 79.69
The FXY continues to bounce from its oversold condition.? The FXY would need to move up to 85.94 to consider the downtrend over.
Longer term, the FXY is still bearish.
AAPL:
Major levels for Apple are 118.75, 115.63, 112.50, 106.25, 100, 93.75, and 87.50.
Apple came within 73 cents of the 118.75 level.
Buying against support is still the best strategy.? A drop to 115.63 would be a buying opportunity.
WATCH LIST:
Bullish Stocks: DIA, AVGO, MMM, BA, CB, NFLX, QQQ, CVX, JACK, NVDA, JPM, APC, WDC, MSFT, XLNX, CRUS, HIG, DFT
Bearish Stocks:? VRSN, VFC, KORS, CTRP, EXPR, OMER
Be sure to check earnings release dates
