Out of Season
By Paul Cherney
There is a trend developing for the markets, the positive historical biases for December are not becoming realities this month.
This is not healthy. I have technical measures based on weekly S&P 500 price action combined with weekly NYSE volume measures which might issue a negative signal as of Friday's close (it looks very likely unless there is a dynamic upside on Friday and the S&P 500 manages to close above 910. This 910 level is a guesstimate on my part based on the formulas used in the system).
I think upside is going to be a struggle and except for the positive bias of the Santa Claus Rally, the path of least resistance for prices is probably sideways to lower.
Even though virtually none of the positive December biases are coming in, December Triple Witch Fridays -- when the monthly stock and index option expirations coincide with the quarterly expiration of futures contracts -- have a bias for positive closes. But large price moves are not that common. Only four times in 16 December Triple Witches (25%) have closing prices for the S&P 500 represented a move of greater than 1% in either direction.
Usually, at the open, the markets move hard in one direction but the buying usually runs out of momentum within 30 or 40 minutes of the open and most of the rest of the session is sideways price action.
The VIX (market volatility index) remained above its 10-day exponential moving average and it has made two closes above this level. Not good. On Thursday, near the close, the VIX's 10-day exponential was near 31.91 An intraday move below this level on Friday would probably be coincident with gains for the markets.
Support: S&P 500 support is 884-867. There is considerable price traffic (support) in the 883-875 area.
Immediate support for the Nasdaq is now 1347-1317.
Resistance: The S&P 500 has resistance at 888-897, then 900-910, then 915-926.27.
The Nasdaq has immediate resistance at 1366-1385.37 and 1381-1412, which makes the immediate focus of resistance 1381-1385.
Cherney is chief market analyst for Standard & Poor's