Tuesday Pre Open (Monday Eve)

Elephant in RoomWell, as said in the last BOOM, either the Vix or the Spx would change direction soon, and the Vix won this round, as Spx gave up the green, and closed red.  The a/d closed at its biggest plurality of the day, and to the negative, taking the M.O. back down below the zero line.  This tells us that money is again leaving the market on a net basis.

Here's a chart of the earnings announcements regarding the 4th quarter, showing the worst spread on record between positive pre-announcements and negative ones.  THIS CAN'T BE GOOD...as it identifies a potential elephant, if not THE elephant, in the room; the E side of the P/E equation.  If the market is priced to perfection on forward earnings, and those earnings are being massively negatively pre-announced, the P side will contract sharply (stocks will fall in price).  Add record leverage to the mix, and it's beginning to look like a red Christmas.

With all the hype today over the Iran deal, crude stalled its decline, and is consolidating.  Once complete, a test of 90 +/-2 is in the cards, even if 98 is tested first.  ONLY a new charge above 112 will negate the longer term bearish projection for sub-70 crude.  Such a charge would require an external event to catalyze it.  The herd now believes the Iranian risk is off the table, so we must look for exactly that; a breakdown in over-hyped deals, which have a history of dissolving.

The metals turned up on a dime, leaving those that weren't looking for a low in the dust.  DSE has been warning of such a turn for the entire month, and viola.

Dollar is consolidating the rise from the Oct. lows, and is inching closer to the day of breakout above the highs of this month near 81.50.

TSLA has come down from the highs near 200 to the zone that DSE suggested there was risk to back in September; the 110 +/-10 zone.  This is NOT currently the time to be short, even if lower prices continue to develop.  The odds of a bounce into the Fibo resistance zone of 160 +/-10 is too great to ignore.  Put holders should exit anytime 125 is broken above, and pull that down 5 points for every 5 points lower the stock moves under 120.  So, at 115, the cover point will decline to 120, and at 110 the cover point drops to 115, etc. (a 5 point 'trailing' buy stop).

More tomorrow...

Tuesday Pre Open (Monday Eve) by

About twwadmin

Ken Goldberg is a Registered Investment Adviser, and is the president and chief market strategist at Trading With Waves. Connect with me on Google+
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