Dow 10,437.42 +0.29%
S&P500 1,110.32 +0.09%
Nasdaq 2,023.78 +.0.27%
Russell 2,000 602.34 (.09)
A followthrough Monday (Nov. 16) after Friday the 13th's strong close was to be expected. Monday's markets managed to eek out wins across the major indexes; however, the first few hours were a bit directionless with the majors frequently traversing between positive and negative territory keeping many stocks in limbo.
It was not until after lunch that the markets started to grind out new highs with basic materials leading the charge (AGU, FCX, MON, MOS, POT, X). As the medium term market trend goes, the big green arrow still points north.
However, we all know the "puppy dogs and rainbows" market will not last forever and corrections happen. Here are a few basic things to keep an eye on in the coming days and weeks - $VIX (CBOE Volatility Index), Gold, commodities, technical support & resistance, news, options expiration.
$VIX - it has been said the $VIX indicator's benign behavior of late is indicative of public complacency with the positive market direction. That said, it is the switch from comfort to fear that shakes the foundations of the markets so keep an eye on any sustained northerly pattern.
Gold - is one of the "go to" investments when the market action gets rough. Granted the demise of the US dollar is causing much of the flow into precious metals, however a continued northerly route will continue to dominate headlines and keep scaring the money out of equities.
Commodities - Oil. On the longer term, there will be a break point when Jed's "black gold" will start to effect the economy...again.
Technical chart support and resistance - On the medium term, all three major indexes (and many others) are still showing strong rising channel patterns off the March '08 lows. As of today, many indexes have broken into fresh multi-month highs which continues to confirm a better market is developing. A closer look reveals the charts are starting to show areas for concern. Many indexes are nearing the top of their respective rising channels (potential resistance) and are at/near critical Fibonacci 50% and 62% retracement levels off the October '07 high to March '08 low swing . Also, the markets have been chugging north since roughly the beginning of this month without much of a correction on mediocre volume which could mean a few days swinging in the rough in the near term. On the current trend, if the Dow and S&P can hold these new breakout levels the next major upside resistance stops are the fall '08 support levels before the bottom fell out. The Nasdaq is in Fibonacci 62% territory which also coincides with last years major support level before the crash.
News - Earnings season is just about over, and what that means is that without the pipeline of corporate quarterly guidance that priced us at these lofty levels weeks ago, market players are left with whatever is at the whim of the media in economic news and foreign market drama.
Options expiration - that time of the month when the markets can get seriously whipped by the action of option players.
The bottom line is the short term markets feels a little stretched and vulnerable to choppy action however the medium trend is still in place. That said, a persistent pullback would be a healthy market move at this juncture to allow all term players fresh entries and build strength for the next leg up.
Tomorrow's Watch
Economic Calendar - US CPI numbers and housing data before the open. No scheduled 10am numbers.
Earnings - A few possible earnings plays that report before tomorrow's open (ADSK, BJ, CHS, EJ, CRM).
The Charts - As mentioned above, the majors have broken out to reach new multi-month highs and are entering overhead resistance territory. Long potential chart plays - momentum follow through on any of the high fliers today (AGU, FCX, MON, MOS, POT, SLV, X). In the spirit of "the trend is your friend", keep an eye on symbols GS and MA for a bullish flag entry signals on daily charts. One caveat on both symbols is that there appears to be a slight divergence from recent highs to relative strength. This means a deeper pullback could be in the works so wait for confirmation before entry.
Short potential chart plays - if the market pulls back tomorrow, watch weak players such as (ESI, MCO).
As always - plan the trade, trade the plan.
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