Friday, December 5 Preview

After what was mostly a boring day, from about 2:30 until 3:30 the S&P dropped about 4%, then in the last 30 minutes recovered about 1.5%. We barely broke yesterday's high (873.75), and we got within about 0.75% of hitting yesterday's low (826.25). Since the market close, the futures have been as high as 853 and have been gliding down for the last two hours, at about 847 now. Today stayed pretty much in the range of 835/840-865/870, which was not a big surprise - the high was resisted by the 20 EMA and the prior day's high, and the low was supported by S1 and several support tests over the last several weeks.

I have a couple of observations on the daily chart. First, even though this week has felt volatile, there have been big daily swings in the same basic range - 820-880 or so. As a result, the bollinger bands have narrowed and the upper band has crossed below the 50EMA. The exact same thing happened on November 3rd, just before we went on that dreadful drip of losing 2-3% per day for two straight weeks, culminating with the drop to 750. However, the last time it happened (on Nov 4), we managed to spend a whole day trading above the 20EMA - the last time we did that was August 29th. The pressure is really building for a run one way or another, and down is much more likely than up.

For Friday, the S&P futures 20EMA is 867 and the pivots are: R2 - 895; R1 - 872; P - 852; S1 - 828; S2 - 808. Prior day high and low are 875.50 and 832 respectively. 872 is an absolute top end for tomorrow unless the employment report has a major upside surprise. On the downside, we'll assault the 828-832 area, and there is a pretty good chance it will snap. The ES (S&P futures) and VIX comparison I talked about earlier in the week has been very consistent; they even tended to land on their own pivot points at the same time throughout the day. Daily stochastics are overbought on relatively light volume over the past week. We could still go another week before we get a major move, but we're in the territory of a snowball effect if things start to run.

The portfolio this week is a joke. I wasn't here to manage anything and do any homework. I've fumbled around with some limited trading time and when I got back to it today I had no discipline - most of my entries were good, and most of my exits were bad. Tomorrow's another day.

Joe