Overbought conditions pointing to a pullback
Tuesday closed the Dow at all time highs, S&P 500 and Nasdaq at six year highs on higher volume. Leaving an accumulation day on the Nasdaq and NYSE. The morning started out bearish and the slow turn around on very neutral market breadth resulted in a late day rally. Even volume was light until the last 90 minutes when the rally kicked in and the buying frenzy began.
Crude ended the day down 30 cents to close at $58.28, leaving the third consecutive down day. Gold also fell for the third day to close at $625.30 -.50. PPI data showing inflation is under control helped push that market lower, however the skeptics are still awaiting Thursday’s CPI data. CPI is the bigger piece of inflation data so it is best to await that before concluding that today’s PPI data was all rosy and tame.
With Tuesday impulsive expansive move to the upside late day and Wednesday now on tap. We have a lot to digest. 8:30 data and 10:30 oil data is likely to be overshadowed by the 2:00 FOMC minutes release. Earnings are also lighter which all could give the market the morning to digest this late day run up. I think we can expect a pullback early, I don’t think it will be really deep, so look for 38.2% on the last leg up and then for some chop until 2:00. Then I would expect the market to start the move to prepare for Thursdays data and bigger earnings. The bulls put market breadth to sleep until late day and we could see that again tomorrow, so be cautious about new positions and chasing. We are seeing an extended market on pretty much every indicator I watch and also pushing those upper bollingers. Which usually gives us a reason to be careful of a pullback and a market that needs a rest.
Some earnings for the Week of November 13 — 17: Wednesday pre market — COCO, MESA, TLB, TYC, and after the bell — AMAT, BEAS, HOTT, LTD, NTAP, PETM. Thursday pre market — BKS, PLCE, HP, MDTH, SHLD, TOPT, WSM, ZLC, ZOLL and after the bell — CPWM, DELL, DITC, FL, GPS, HPQ, INTU, ISLE, MRVL, MSCC, SBUX. Friday pre market — ANN, KIRK,
Economic due for the Week of November 13 — 17: Wednesday 08:30 NY Empire State Index, 10:30 Crude Inventories, 14:00 FOMC Minutes, Thursday 08:30 CPI, 08:30 Core CPI, 08:30 Initial Claims, 09:00 Net Foreign Purchases, 09:15 Industrial Production, 09:15 Capacity Utilization, 12:00 Philadelphia Fed, Friday 08:30 Housing Starts, 08:30 Building Permits.
ES (S&P 500 e-mini 60 minute chart below) Wednesday’s pivot is 1393.25, weekly pivot is 1382. Late day rumors of big orders in the S&P sent us flying up and volume soaring leaving the highest volume day for the December contract (1,487,734). Clearing the 1395.25 resistance was a big move, now to sustain this we have to stay above it. Intra day Support: 1395.25, 1393, 1391.50, 1389.50 and 1383.50. Resistance: 1400.25, 1401.75, 1403.25 and 1407.75.
Compx (Nasdaq composite monthly chart below) closed +24.28 at 2430.66. Support: 2416.85, 2407.82, 2393.61, 2383.49. Resistance: 2437.74, 2468.59, 2474.10.
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