Better To Be The Hammer Than The Anvil

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Emily Dickinson

For all intense and purposes, when an instrument such as NASDAQ (QQQ) has an inside day, (we could arguably say 2 inside days since last week, the Wednesday and Thursday highs were virtually the same), the technical setup is a no-brainer. You short the break of the lows, buy the break of the highs. But, as this truly is the year of departure from conventional wisdom with the contrarian horse all saddled up that did not happen easily last Friday.

Instead, QQQs opened lower taunting the bears, then proceeded to rally back over the lows of the prior 3 days and after trading above that 3-day lows most of Friday’s session, gave it up near the end of the day, failing 1.10%. I am focused on QQQs because of the runaway gap that occurred on October 31st that has yet to fill-bullish until it does.

Furthermore, Friday’s session ended with what is known as an inverted hammer candle (After a downtrend, the formation of an Inverted Hammer may be bullish because prices hesitated their move downward by increasing significantly during the day. Nevertheless, sellers came back into the stock, future, or currency and pushed prices back near the open, but the fact that prices were able to increase significantly shows that bulls are testing the power of the bears. What happens on the next day after the Inverted Hammer pattern is what gives traders an idea as to whether or not prices will go higher or lower.)*Online Trading Concepts

Turning my attention to IWM or the small caps, they had had a true 2 inside day formation coming into last Friday. However, although IWM was weak, the 200 DMA with its younger brother the 50 DMA right below that kept a lid on what could have been a disaster day from happening.

The Dow, on the other hand, where the blue chips and particularly IBM live, took the hardest hit (down 3.7%) last week. This appears to be a reflection on global growth concerns which of course includes falling oil prices.

All last week I wrote about public perception regarding interest rates. Indeed, the continuation of the rally in TLTs or the Long Bonds, presents a crystal clear flight to safety rather than a relief that the Fed will keep rates low.

Stocks had their worst week in two-and-a-half years losing 3.5%. Oil is at a five year low. Next they’ll be telling us Santa Claus does not exist!

Watch: Oil, Rates and Inverted Hammer in QQQs. If Oil rallies, Rates rise and QQQs hold, will look a lot alike Christmas once again!

S&P 500 (SPY) 200.22 the 50 DMA to hold or not. Russell 2000 (IWM) Another inverted hammer candle sitting atop the major moving averages. If nothing else, a technical analysts dream!Dow (DIA) Remember my vote as the first one to reach the 50 DMA-close and getting closer. 50 DNA is 172.47Nasdaq (QQQ) We’re counting on you Nas. And if you can’t hold and recover over 103.55 that runaway gap looks like the runaway ain’t so far from home.KRE (Regional Banks) Holding onto the 50 DMA which is sloping positive-still hopeSMH (Semiconductors) Support at 54.00 and over 55.00 much betterIYT (Transportation) Held up better than most but that is only part of it-looks weak under last week’s lowsIBB (Biotechnology) Closed beneath the fast moving average but into some support at 305.XRT (Retail) Consumer confidence gave this a boost-needs follow through over 93.08IYR (Real Estate) Testing the bottom of a recent range between 76.00 and 77.50GLD (Gold Trust) Friendly near term unless it cracks under 115.75USO (US Oil Fund) Will wait for signs of last week’s final gasp a possible exhaustion gap after some big volume and lots of shortsTBT (Ultrashort Lehman 20+ Year Treasuries) TLTs WOW