|
|
||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||
|
Short-term
Outlook:
Short-term Strategy
What: We will remain neutral.
Why: The range we've been in for a month
continues to dominate short-term trading, though it is
starting to shift a bit to the upside. We saw an
upside breakout on a closing basis early last week, and the
bottom late last week came at a higher level. That's a
weak argument for further strength, but given neutral
short-term sentiment readings and neutral seasonality (until
later this week, when it turns consistently positive again),
it's about all we have...all four of the "decision boxes"
below are pointing neutral.
Sentiment:
Trend:
Most of our indicators are neutral. Still in the
trading range: 1085-1110 Support/Resistance:
Other Tendencies:
Resistance is still around
1110-1115, while support is still at 1085. Nothing notable - seasonality
doesn't turn positive until later this week.
Intermediate-term Outlook:
Intermediate-term Strategy
What: We will remain neutral.
Why:
In March,
we discussed a large number of reasons to expect an imminent rally
of one to three months' duration, or perhaps even more.
We've had ample opportunity to discuss the historic
momentum since that low, and have seen little reason
since to expect anything other than short-term
corrections. In
late October, we looked at
some "toppy" kinds of studies, and multiple
failures to hold the 1100-1110 breakout area are another
warning sign. This is especially the case after we've
seen a
surge in
speculative activity, which has continued during the
first week of December. The S&P has broken to a new
closing high, which usually results in further short-term
gains, but these initial breaks often have mean-reverting
tendencies longer-term, and the market very often runs into
trouble during the "meat" of January, so we're not looking
to trade an upside breakout on an intermediate-term time
frame.
Sentiment:
Trend:
Smart/Dumb Confidence Spread is neutral.
The S&P has a rising 200-day average and a series of
higher highs/higher lows. Support/Resistance:
Other Tendencies:
Possibility of a "false" breakout (again) at 1110. Pullbacks after highs
have been positive, but we've seen some "toppy"
kind of behavior and speculative activity.
Equity Indicators - Updates and Extremes
For the past few
weeks, one of the more troubling indicators has come from the options
market, where speculation has ramped up considerably.
Last week, there wasn't much of a change.
Small speculators continue to trade too many calls versus puts, and
large traders have almost gone exponential with their call buying
(likely as a stock-replacement strategy to lower risk in case of a
downturn).
That combination help increase the Options Speculation Index yet again,
this time to a three-year high and one of the highest readings since
2000. This indicator looks at total bullish options bets (buying
calls and selling puts) and compares it to total bearish volume (selling
calls and buying puts).
Low volume can skew options figures, but that was not an issue this
week, as volume actually rose to the highest figure in over a month, to
more than 25 million contracts.
There have been four other weeks that the ratio moved above 1.20:
July 21, 2000: Immediate, hard decline, then ramp into the
peak of the bull market.
September 8, 2000: Immediate, hard decline...then it just
kept right on dropping.
January 30, 2004: Market held up for a month with slight
gains, then chopped lower for six months.
December 16, 2005: No directional movement for two months,
then a multi-month breakout which eventually failed.
|
||||||||||||||||||||||||||||||
|
Equity Market Indicators
Notes: Corporate insiders, equity index futures positions (primarily in the Nasdaq 100) and the various sentiment surveys continue to be the more worrisome indicators among the broad groups that we follow. Most of the others are either neutral or slightly bearish (for the market).
Among individual indicators, we continue to watch most closely for scenarios where 0% are bullish and 30% or more are bearish, which has been a very consistent predictor of imminent short-term weakness since March.
More history:
* New extreme
|
||||||||||||||||||||||||||||||
|
Bonds, Commodities and Currencies - Updates and Extremes
Nothing notable for today.
On a personal note...
I mentioned about a month ago that I got a new PC, and the transfer was nearly flawless thanks to PC Mover by Laplink. But the PC itself, a HP Pavilion dv7-3085 from Best Buy, overheats daily. This is which a newly cleaned internal fan, a BIOS update, a dual-fan laptop cooling pad, and the occasional ice pack applied directly to it. The only thing that keeps it (relatively) cool is a desktop fan blowing directly on it. Beware.
I've started training for the 2010 Ironman Wisconsin (2.4 mile swim, 112 mile bike, 26.2 mile run). It's my first, and likely only Ironman...just one of those personal challenges I want to see if I can conquer. The past couple of months have been going OK, but is there any more difficult hurdle than running in sub-zero weather and NOT eating Christmas cookies? I'm failing the latter.
Jason Goepfert Founder, Sundial Capital Research, Inc.
Forwarding or other distribution of this email is prohibited without the express permission of Sundial Capital Research, Inc. If you do not possess a firm-wide license, then forwarding this message will violate your subscription agreement.
|
||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||
For
December 21, 2009
Neutral As of Dec 17,
1098
SPX
Bearish For The Market