Can Santa stop Scrooge from ruining the S&Ps holiday cheer?
Dec. 21, 2006 — AvidTrader.com covers a wide variety of futures markets each session, throughout the day. Scroll down for today's free look and for a free two-week trial.
Coverage for December 22.
Justice delayed......Is justice denied? Thursday's lows began forming at the noon hour's end. Repeated probes of slightly lower lows were each recovered. But had sufficient time to exploit sellers' lack of follow-through, but didn't. Put another way, instead of letting buyers possibly gain traction with a corrective bounce, sellers neutralized the noon hour's oversold condition by ranging sideways narrowly. This pattern often blips-up momentarily, then drops sharply into a new downleg. Thursday's pattern blipped-up, but didn't resume the decline. Unless buyers gain enough traction on an opening bounce Friday (i.e. bias-up), another downleg remains likely.
Tortoise and the hareThe futures premium to underlying SPX cash shrank to as little as 10 points when Thursday's lows began forming. That was at least one full point lower than the morning spread, and it reflected extreme pessimism. Any halfway sober technician can confirm that extreme pessimism is bullish. In fact, the decline suddenly stopped. But more interesting than pessimism's extreme is that price remained at its extreme while the premium expanded back to the morning's levels. Put another way, instead of letting buyers possibly gain traction with a corrective bounce, sellers neutralized the noon hour's oversold condition by ranging sideways narrowly. Sound familiar?
Bah, humbug! Ho-ho-ho
Thursday's oversold condition has been neutralized. S&Ps are sitting at their lows (NDX and the Dow, too). Momentum points down. What could possibly prevent a drop Friday? Not what, but who. Santa. Three-day holiday weekends tend to produce bullishness, if only in their ability to inhibit sponsorship for trending. The seasonality doesn't appear to be having an impact this week, so it might not appear until after Christmas - and from lower levels.
Friday’s Trading Plan
Volume already began drying up Thursday, but it should really start to evaporate soon after Friday's open. That makes it difficult to find sponsorship for trending, let alone breaking relevant support or resistance. Consumer Sentiment is due 30 minutes after the open, and post-open economic reports tend either to reverse or to accelerate any trending underway. S&Ps are sitting at recent lows, so a gentle shove at Friday's open could easily slide lower into noon. And the slide could be either 5 points under Thursday's close, or 9 points to SPX 1409.25 (ESh 1420'25). Otherwise, an opening surge that doesn't reverse down by the 10:15am ET opening sequence exit could delay further selling until next week.
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