Stocks extended their corrective ways as the major index ETFs fell over 1%. While most news outlets suggested that this was a taper tantrum, I am not so sure because stocks were up substantially in November, not to mention year-to-date. The prospects of a taper have been building for weeks after a stream of positive economic reports. This is not big news, but taper became even more likely after the Congressional leaders put together a bipartisan budget deal, which will go to vote in the House on Thursday. I am not so concerned about tapering because I think tapering is actually positive. The Fed would not consider tapering if it did not have confidence in the economy. Moreover, taper is not the same as tighten. In any case, the correction continues and SPY is now down a whopping 1.5% from its closing high, which was on Monday. This decline is a mere drop in the bullish bucket and it is certainly not enough to warrant long-term concerns. Short-term, SPY could even pull back another 1-2% and ultimately find support in the 175-177 area, which is just below my short-term support level on the 60 minute chart. If I had to hazard a guess, the market could remain soft until early next week and then get a bounce after the Fed meeting (next Wednesday).
**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
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Key Reports and Events (all times Eastern):
Wed - Dec 11 - 07:00 - MBA Mortgage Index
Wed - Dec 11 - 10:30 - Crude Oil Inventories
Thu - Dec 12 - 08:30 - Initial Jobless Claims
Thu - Dec 12 - 08:30 - Retail Sales
Thu - Dec 12 - 10:00 - Business Inventories
Thu - Dec 12 - 10:30 - Natural Gas Inventories
Fri - Dec 13 - 08:30 - Producer Price Index (PPI)
Charts of Interest: Tuesday and Thursday
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
