“The S&P Volatility Index ($VIX, 17.84, up 0.17) closed above 17.50 following Wednesday’s surge from 15.57 to 17.36. We said last week a break above this level could lead to a test to 20 and Friday’s high was 19.93. The bulls will try to get under this level to start the week and make another push towards 15 but a close above 20.5 could cause some panic with a push to 25-30 in January.
This week could be the most crucial week all year for the market as it will likely set the tone for January, and possibly 2013. Although a Fiscal Cliff deal was not struck before our December 21 deadline, Obama did say he would see everyone back at the White House “next week”, after Christmas. This means there is hope in what will be a shortened holiday week. The market is open a half day on Monday, closing at 1pm (EST) and Tuesday, of course. The rest of the week will be regular trading.
As we watched Obama give his speech on Friday after the market closed, we had a feeling he would say something to stop the bleeding and offer a bit of encouragement to the bulls. With so many people predicting he wants America to go off the Cliff, it would be hard to imagine the President coming back to DC from Hawaii if a deal is NOT in the works because he wouldn’t waste his time. If he is a no show, then we can pencil-in a Thelma and Louise.
The indexes were trending higher off the lows in the second half of trading on Friday so we are expecting a higher Monday with the zombies away for Christmas. It will be important for the bulls to get some green to start the week or the market could have a negative Friday/ Monday close for the first time since late September.
Despite the drama and volatility, the Financial stocks held up well and ended the week with a nice gain. The Financial Select Spider (XLF, $16.40, down $0.40) hit a fresh 52-week high of $16.70 and could run to $18 on continued strength. A close below $16 would be bearish. American Express (AXP, $57.65, up $0.25) held its 50-day MA and ended Friday’s session with a gain and could still push $60. JPMorgan Chase (JPM, $44.00, down $0.53) ended lower after falling to $43.34 but easily held it 50-day MA. A close below $42 would be bearish but we think shares can still make a run at their 52-week high of $46.49. We will be watching this sector and these targets for market clues again this week.
One sector we haven’t mentioned in a few weeks is the Transports as they are also showing strength. The Dow Jones Transportation Index ($DJX) closed at 5,340 (down 17) on Friday after trading up to 5,372 midweek. The 52-week high is 5,424 and is just over 1% away. If the bulls can clear this level, the market should be challenging 52-week highs. The 2-year chart below show a run to 5,600 could be in the cards. If there is a failed test at the first level of resistance (5,400) and no Fiscal Cliff deal, these two negative headlines will be more than enough for the bears to stay on the attack.
Apple ($519.33, down $2.40) traded to a low of $501 to start Monday’s session but gained $9 by the close. On Tuesday, shares closed just below $534 but tested $510 on Friday. If Apple can clear $535 this week, Tech will be in good shape but a close below $500 would be another chip for the bears to play with and will certainly drag the rest of the market lower.
Gold is at a 4-month low after falling to $1,636 last week and closing at $1,657 an ounce on Friday. There could be a test to $1,600-$1,575 and where would consider buying the yellow metal. A close above $1,700 again would be bullish.
We have been buying Silver at different prices all year long and we had a feeling the “poor man’s gold” would drop below $30. Silver touched a low of $29.64 last week and closed at $29.98 an ounce. We are looking to add to our position at $28-$26 but we may or may not get that chance. We believe Silver will be at $50 an ounce or higher in a few years.
For those of you who don’t know how to buy Silver (or Gold) coins, email Cat and she will give you the information. We believe EVERYONE should own some physical gold or silver for their portfolio.
We could say Friday’s pullback was purely technical and to a degree it was our support targets held for the most part. The indexes are still being held hostage by the zombies and we highly doubt a deal will be delayed until next Monday which is the last trading day of the year and the deadline for the Fiscal Cliff.
We have a feeling the market could move 4%-5% higher or lower by the end of the year based on this week’s events. A 4% move for the Dow would get the blue-chips to our 13,777 target while a 4% drop would put the index at 12,600. The S&P would be at 1,490 and near our 1,492 target while a 4% drop would put the index at 1,375. The Nasdaq would be at 3,150 or 2,900 and we have gone on record with a yearend target of 3,040. The Russell 2000 would be trading at 885 and new 52-week highs or 815 and below its 50-day and 100-day MA’s.
We closed out 7 more winning trades last week for the Daily and 1 for the Weekly. We are going into the last week plus a day of trading with a bullish stance and if there is a deal we will likely keep them open going into the New Year. However, if there is no deal and the bears start to crack lower support levels, we will close out our call options and take profits where we can to start preparing to possibly go short.” (from12/23/2012 Weekly Wrap and 12/24 Daily)…
The talking heads and Wall Street pros were telling viewers and clients on Friday that the market isn’t “technically” driven right now and has been reacting to the headlines. While this is true to a degree, the market has been and will be technically driven and the headlines are pushing key support and resistance levels.
We mentioned on Friday that these knuckleheads don’t do homework and there were plenty of signs that showed a downtrend and a test to the bottom of the current trading range was coming. While they can be stretched at times, trading ranges can have wild price swings but there are levels to watch for when looking for a breakout or breakdown.
We also said last week we were looking for the market to make a 4% move by today’s close and last week’s drop was 2%. The selling pressure on Friday picked up steam in the final 30 minutes of trading when it was reported the President had no new offer on the table. The zombies met again last night but they still don’t have a deal. Of course, they only worked an hour and half last night so we didn’t expect much. With less than 16 hours away to a deadline, they will meet again this morning at 11am (EST). Unbelievable but not really when it comes to lame-duck politics. (continued…)
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