The Week Ahead: Will the Grinch Steal Christmas?
The warning flags are up, and time is using out for a plain rally. Be careful, and watch these pivotal indicators over a subsequent few weeks to see where a breeze is blowing, writes MoneyShow.com comparison editor .
Friday’s final triple-witching day of 2011 was flattering still overall. Despite generally good news for a US economy, holds sealed reduce for a week. This creates me consternation either a Grinch has already done his gamble that holds will finish a year on a diseased note.
The short-term technical design has deteriorated, and as we plead later, it could spin disastrous early this entrance week if holds destroy to mountain a good rally. Analysis of a Volatility Index (also famous as a "fear index") both in a US and in Europe suggests that even a many strident bears are not awaiting a marketplace to thrust going into a finish of a year.
Some measures of a Euro debt predicament indeed softened final week, even nonetheless many are still endangered that a new executive bank movement and limit agreement might not be enough. IMF conduct did not paint an confident design of a tellurian economy on Friday, forcefully arguing that all countries indispensable to assistance Europe in sequence to avert an even worse financial crisis.
In an engaging Bloomberg TV interview, mythological interest-rate consultant Jim Grant dispelled that idea that European executive banks are doing little, as in existence they are copy large amounts of money. Grant pronounced that “in Switzerland, a Swiss National Bank has been flourishing a resources over a past 3 months during a rate of in additional of 300%.â€
If this is indeed a tellurian trend, afterwards a longer-term acceleration implications are hugeâ€"but investors should also comprehend that a light arise in a rate of acceleration is bullish for a stock market.
Clearly, final week’s US acceleration numbers were weaker than expected, and there's no pointer nonetheless of a vital arise on a horizon. Many are some-more disturbed about deflation, like what has dejected a Japanese economy given a batch marketplace appearance in 1989.
Last week’s movement in a bullion marketplace positively did not simulate inflationary fears. The SPDR Gold Trust () was down over 7% for a week. we had that bullion was utterly exposed to a pointy decline, shaped on as good as my prolonged knowledge in a bullion marketplace that it was utterly exposed to a pointy decline. (Keep reading for my latest updates to that forecast.)
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Of course, a large warn for 2011 was a opening of a Treasury market. This draft compares a opening of a iShares Barclay 20+ Treasury ETF () with that of a SPDR Gold Trust () and a Spyder Trust () given a start of 2011.
It shows that TLT is adult 33.7%, with GLD now usually adult 15% (it was adult over 37% in August), and SPYÂ now down for a year. Furthermore, a suggests that holds could be prepared to theatre another rally. This pierce to reduce yields has potentially disastrous implications for stocks.
As we remarkable earlier, better-than-expected jobless claims Thursday (hitting a three-and-a-half-year low) was only one of a certain mercantile numbers final week. State Manufacturing was most softened than expected, as was a Fed report. However, industrial prolongation numbers were weaker. The concentration this week is on housing, with a Housing Market Index on Monday, followed by housing starts Tuesday and existent home sales Wednesday. On Thursday, we get a final reading on GDP for a third quarter, as good as jobless claims.
The bustling mercantile week draws to a tighten Friday, as we have durable goods, personal income, and outlays, as good as new home sales, before a three-day holiday weekend. (All markets are sealed on Dec 26.)
WHAT TO WATCH
Last week’s movement was positively disappointing, as was Friday’s churned close, as early strength dissolute by a close. The marketplace internals were certain Friday, though a altogether movement did not give us any clever signals for Monday’s session.
The view has indeed gotten a bit some-more bullish over a past few weeks, that we found utterly surprising. The series of bullish newsletter writers is adult to 45.3%, and has softened from a early Oct reading of 34.4%.
Inpidual investors as totalled by a AAII consult are also some-more bullish as of Dec 15, with some-more than 40% bullish. This is positively in contrariety to my analysis, given we became some-more discreet as a week progressed.
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One marketplace index that we will be examination closely is a German Dax. The settlement given a Aug lows (lines b and c) is looking some-more like a . These are interruptions or pauses in an ceiling or downward trend, and on a pierce next 5,360, a Dax is expected to test, if not breach, final summer’s lows.
The daily has forsaken next a 0 line, that indicates a short-term movement is negative. It would take a pierce behind above 6,170 to retreat a deterioration. The Oct convene unsuccessful to overcome a vital 61.8% retracement insurgency during 6,549 and decisively overcome a downtrend (line a).
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S&P 500 The Spyder Trust () traded next a disappearing 20-day EMA for a final 3 days final week, and has now filled a opening from a Nov 30 rally. The uptrend (line b) is now during $119.65, with a before pitch low during $116.20.
This week’s trade lesson, was created to sight batch investors how to use a A/D line. This will come in handy, as a S&P 500 A/D line is coming a vicious juncture.
The uptrend in a A/D line (line d) was damaged final Wednesday, though it has given incited up. The A/D line needs to pierce behind above a WMA and a downtrend (line c) to vigilance aloft batch prices. Conversely, a dump next final week’s lows and a late Nov lows would clearly be negative. The SPY has teenager insurgency now during $123.20 and afterwards $125.40, with vital levels around $127.56. A tighten above this spin will vigilance a exam of a Oct highs of $129.42.
Dow Industrials The Spyder Diamonds Trust () is still behaving softened than a SPY, though is also next a prosaic 20-day EMA (in red). There is still support from a new opening between $116.18 and $118.41.
On Dec 7, DIA came within a few cents of a Oct highs, and a disaster to mangle out is now looking a bit some-more negative. If these highs are decisively overcome, a 127.2% retracement insurgency stands during $125.61. The daily Dow Industrials A/D line also disregarded a uptrend (line h) final week, and is still next a prosaic WMA.
A clever pierce above a prior rise and a downtrend (line g) is indispensable to spin a movement positive. A tighten in a A/D line next a late Nov lows would emanate a short-term downtrend.
There is initial insurgency now during $120, and a tighten above $121.50 would be a certain sign. On an upside breakout, a initial aim is $125.61.
Nasdaq-100 The PowerShares QQQ Trust () hold adult flattering good final week in light of both a increasingly disastrous opinion as good as a proclamation that (INTC) would skip a foresee due to supply problems caused by a floods in Thailand. INTC was down over 6% for a week.
There is initial support during $54.60 (last Thursday’s low), with trend line support during $53.80. A dump next a Nov lows during $52.87 is expected to trigger most heavier selling.
There is a rope of insurgency now between $56.40 and $57.62 that needs to be overcome to urge a outlook. The daily A/D line is still holding above a uptrend and a late Nov lows.
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Of course, one of a problems for a tech zone has been a diseased movement of some of a leaders. Take Apple (). Apple's new convene unsuccessful next a insurgency during $400, and this week it shaped a low tighten doji (LCD) formation.
For those who are supporters of candlestick charts, a LCD is a disastrous arrangement initial described by . It is discussed in his book Candlestick and Pivot Point Trading Triggers.
The 38.2% Fibonacci support and a weekly uptrend (line a) are in a $352 area, with a 50% support and a weekly during $329 to $331. The weekly unsuccessful to endorse a new highs, as indicated by a downtrend (line b). It is next a WMA, and a mangle of support (line c) would be some-more negative.
Russell 2000 The iShares Russell 2000 Index Fund () has also filled a opening from final month, and was a bit stronger on Friday, though sealed good next a highs. IWM still needs a integrate of uninterrupted clever closes to spin a relations performance, or positive.
There is still pivotal insurgency during $74.40 to $75.39, that was a early Dec high. A tighten above this spin will vigilance a plea to a vital 61.8% insurgency in a $77 area (line d).
The daily A/D line unsuccessful to pierce above a disappearing WMA on a new rally, that is not an enlivening sign, and it is not distant above a critical support during line f. Of course, a dump next a Oct lows would be even some-more negative.
There is initial support during $70.58, with a uptrend (line e) now during $69. The Nov 25 lows follow during $66.62.
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