Friday, December 07, 2012
Stock Market Commentary:
The major averages placed a near term low on Friday, November 16, 2012 (Day 1 of the current rally attempt) after politicians hinted that a deal would get done for the fiscal cliff. If November’s lows (SPX 1343) are taken out, then odds favor lower, not higher prices, will follow and this rally attempt will have failed. Additionally, a new rally will be confirmed when we see at least one of the major averages rally at least 1.4% on heavier volume than the prior session or if one of the major averages jump above their respective 50 DMA lines on heavy volume. Keep in mind that the path of least resistance is down until the major averages confirm their latest rally attempt and break above resistance (50 DMA line) and their downward trendlines. For those of you that are interested, Friday marked Day 15 of a New Rally Attempt which means that the window is now open for this rally attempt to be confirmed with a new follow-through day.
Monday-Wednesday’s Action: Stocks Fail At 50 DMA line
Thursday & Friday’s Action: 146k New Jobs and 7.7% Unemployment Rate
Market Outlook: Downtrend
From our perspective, the market is in a clear downtrend until the major averages break and close above their respective 50 DMA lines. It is encouraging to see that the major averages are down less than 10% from their 2012 highs. On October 9, we said “the rally was under pressure” and then said the “rally was over” on Oct 19. Since then, stocks have gone straight down and a lot of technical damage has occurred. We will turn more bullish once the major averages confirm a new rally attempt and then trade back above their respective down trendlines and 50 DMA lines. As always, keep your losses small and never argue with the tape.