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Wednesday, December 24, 2014

Daily update 12/24 Selling into the close again

The futures gapped up yet again and proceeded to do nothing for hours.  They sold off a bit going into the close just like yesterday.  Here is the daily chart.

It was another very narrow range bar at the high.  That chart still looks funny to me.  In another time period it would look a lot like a double top forming.  With Art Cashin on TV every day telling me how the seasonal pattern and presidential cycle are all bullish for next year there is no way the market can do anything but go up.  Lets look at the futures chart.

The futures ended the day with a white bar.  This is the first sign of a loss of momentum since the bounce started.  The last several bars look like we are already in consolidation mode.  We are only a little bit above the prior peak so we still have that to think about if sellers show up.  The key chart in my book is still IWM.

The red line is the high from back in the spring.  IWM bumped its head on it yesterday, but so far has not penetrated it.  If it falls back into the recent trading range before breaking out above it could be a significant negative sign.  I have seen a lot of people expecting an upside break out here.  I can't recall seeing anybody thinking otherwise.  There is a bit of expanded volatility in this chart now.  It is considerably different then the expanded volatility on the SPX daily chart.  The VIX is still showing a sizable divergence.  Are these all signs that volatility in general is going to pick up next year?  In the late 90s the market went up along with volatility.  An increase in volatility next year does not necessarily mean the market is headed down.  However, the big divergences in the market internals suggest that may be the case.  I am curious to see how things work out.

The liquidity is likely to be pretty thin the rest of the month.  Buying interest at the highs appears to be muted.  The gains have all come in the overnight hours.  In the absence of bad news it is possible next to nothing happens until Jan.  The only caveat to that is the selling into the close lately.  If profit taking overruns what few buyers there seem to be at these levels we could get a bit of a pullback.

Merry Christmas to those that celebrate that holiday.  Happy Holidays to everybody that celebrates anything this time of year.  To all others, have a great Dec. 25.


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