Wednesday, December 3 Preview

If you like numbers, you'll love this. Tomorrow's Pivot point is 837 - call it 835 to 840 and we already know that there is a lot of support/resistance in that range. Tomorrow's first Resistance pivot point is 861 - call it 865 and that also was a solid resistance line over the last several weeks of trading. In addition, the 865 range is about the 20-day EMA as well as the downward trendline for the descending triangle (or descending channel, you pick). I'll be shocked if you give up 865/870 tomorrow, doubly so if we hold/close over that line.

Tomorrow's first Support pivot point is 824. Not all that noteworthy, but getting close enough to that 820 line I mentioned last night.

The bottom line is that there is a lot of containment within the 815-870 range tomorrow, and I think if we test either one and it holds, we go on to test the other.

Tuesday was an inside day. Since an inside day tells you nothing about trends, I like to combine it with the prior candle and see what you get. In this case (combining Monday with Tuesday), we wind up with a "hanging man" - a red candle with a long bottom shadow (or wick). Here's a description of the hanging man: "The hanging man has a red body and a long lower shadow after a series of green uptrending bars. The long lower shadow marks the bulls' failure to prevent the bears making a new low and also from keeping the close below the open. You may see this bar in other places within a series of bars, but when you see it at the top of an uptrending series [like we had last week], you should consider that the trend is probably over. The wise course is to take your profit and run."

If you are a bull looking for solace in today's action (beyond the misleading green candle), today was only the second time that an initial down day was met with an up day. In virtually all other cases lately, a down day coming after an up day was typically followed by another down day - even the severe ones - 10/14, 11/5, 11/19, and those were all ugly two-day runs, losing 14%, 9% and 12% respectively. The only other green/red/green candle set where the red candle closed below the prior day we've seen recently was Oct 24, 27 and 28. Notice that also was a Fri/Mon/Tues for what it's worth. However, on that run, the Tuesday closed higher than the highs of the two prior days, and that Tuesday gave us a spectacular 8% gain for the day. Today was about a 2.5% gain. I'd call that bearish.

If we've just started another bear market rally or bear flag, it's gonna hit the resistance and head down by Friday at the latest. It simply runs out of headroom. We break 870 tomorrow, and I have to erase all my trendlines and start over again.

Wednesday, watch CHK as a leading indicator - if it bounces from $14.35 and takes another trip to the resistance line of it's descending triangle, the markets probably will also. If if breaks below $14, it's going to $4 and the markets will soon follow to new lows as well.

Joe