Stock market outlook remains worrisome

Market Snapshot for December 17, 2011 (9:52 a.m. ET):

  • Closing Prices: DOW 11,866.39 (-2.42, -0.02%), S&P 500 1,219.66 (+3.91, +0.32%), NASDAQ 2,555.33 (+14.32, +0.56%), Nikkei 225 8,401.72 (+24.35, +0.29%), DAX 5,701.78 (-28.84, -0.5%), FTSE 5,387.34 (-13.51, -0.25%)
  • OIL 93.53, GOLD 1,597.90, SILVER 29.671
  • EURO 1.3042, YEN 77.78, BRITISH POUND 1.5542, U.S. DOLLAR INDEX 80.84

Weekly Resistance Proves Difficult to Overcome

The market has been struggling over the past couple of weeks. The late-November/early-December recovery struck strong daily, as well as weekly resistance just over two weeks ago. This level corresponded to the early-November congestion zone and highs. It was also the 200-day moving average level in the S&P 500. The pace of the buying slowed as this zone hit, thus shifting the underlying intraday momentum. This shift in momentum resulted in a breakdown that began on December 8th coming out of the slower uptrend channel. Even though the market recovered modestly ahead of that weekend, the selling resumed early Monday morning on the 11th.

We continued to see modest recoveries on the 15 minute time frame throughout the past week, but each attempt was punctuated by a faster decline that quickly eroded those efforts. This past Friday was no exception. A slowdown in the selling pace afterhours on Wednesday evening was followed by a rapid move out of the Momentum Reversal buy setup into Thursday, but the momentum of the upside shifted once again into Friday's session, resulting in the closure of the morning gap mid-day after a rapid morning reversal (selloff). Shares remained weak into the closing bell with the broad market lower by about 3% for the week.

Dow Jones Industrial Average (Figure 1)

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