Deadlocked

Typically the week of Black-Friday the retail stocks put the markets higher in anticipation of the holiday spending frenzy.  A quick look at the ETF, RTH on a weekly and monthly chart you will a very nice breakout to new has occurred suggesting a rally is possible.  However, a quick look at the indexes and we see up-trends but also a tightly range-bound price action in the DIA, SPY and the QQQs.  The Bulls and Bears appear deadlocked in a rising volatility environment.   Because of that, I suggest a little caution is in order.  If the DIA breaks down through price support, the Bears could gain the advantage.  On the other hand, if the QQQ can breakout to new record highs the Bulls could gain the edge.  We don’t want to bet caught in this struggle because very quick reversals can happen leaving us staring at large losses.   Focus on price action!  Clues to which side gains the advantage will always appear there first.

On the Calendar

On the Economic Calendar today we have a very light day.  First Leading Indicators at 10:00 AM and then bond auctions and announcements.  None of which would be expected to move the market.  Keep in mind this is also a Holiday Week which could volumes begin to decline by mid-week making for choppy price action.

On the Earnings Calendar, we have just over 50 companies reporting today.  URBN will report this morning, and INTU and PANW are among the afternoon reports.

Action Plan

During the evening futures where sliding south at a pretty quick rate.  At my last look before going to bed, the Dow Futures were down nearly 60 points.  About 2 AM Futures began to turn around clawing their way all the back to even.  As of now, futures are mixed and almost even with Friday’s close.  Today the DIA is my biggest concern holding just above price support with a bearish price pattern.  Thursday’s big rally now appears on the DIA as a lower high.  The SPY and the QQQ’s are in better shape having left behind and inside day.  Last week I wrote a lot about the importance of follow-through.  As of now, last Thursday’s rally has not only not been unable to follow-through, but the DIA completely reversed on Friday.

As a result, the market is between the preverbal rock and a hard place.  A follow-through down in the DIA will test and could even break support possibility emboldening the Bears.  All the major averages are currently below resistance levels with the QQQ having the best chance of breaking to new highs.  If by chance the QQQ’s can muster the energy to break out the Bulls might be emboldened to push the SPY and the DIA higher.  As the indexes are in a pretty tight price range, there is not a lot of room for error.  Remain flexible and focused on price action for clues.

Trade Wisley,

Doug

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